China HR Mistakes To Avoid
The executives interviewed are of the view that "the No. 1 impediment to [their company's] growth in China is finding the talent they need to scale their businesses" and Shaun is of the view that these companies are, at least to a certain extent, responsible for this problem:
As China shifts from manufacturing to a service-led economy, the demand for skilled labor is heating up. The lack of white collar workers has created a mercenary class of executives who bounce from job to job seeking wage increases of even just several hundred dollars a year. Many multinationals follow misguided human resource strategies that intensify the problems. The companies that implement the right HR strategies and focus on three key areas will be able to attract and keep the right executives needed to turn their China operations into humming profit centers.
The mistakes Shaun describes and his solutions also apply to small and medium sized foreign companies (SMEs) doing business in China.
First mistake: Glass ceiling. Two-tier pay systems undermine the morale of Chinese workers who want to climb the corporate ladder and cause top mainland talent to prefer to work for domestic Chinese companies, where they do not feel discriminated against. China Market Research Group exit surveys with Chinese workers leaving multinationals indicated the main reason they had left was their feeling they lacked a clearly visible career path with their company. "The majority said they would have stayed if they felt that the company appeared to be 'interested in developing their careers.'"
Multinationals doing business in China should implement uniform pay packages, increase the number of high level Chinese executives who get promoted through the ranks and develop clear career paths that Chinese employees know they can follow.
Second Mistake: Ignoring Need for Work-Life Balance. China's baby boomers have experienced 30 years of uninterrupted economic growth and they are "incredibly optimistic" about their career paths. In interviews with Chinese between the ages of 21 and 28 in Shanghai, Beijing and Guangzhou, the overwhelming majority responded that a "balanced life" was the most important consideration in job satisfaction, ahead of a good salary and job security. Companies need to understand that paying high salaries is no longer enough to keep executives from jumping ship.
Third Mistake -Ignoring education and training. Chinese employees need and want continuing education and training options. An online survey revealed that 90% of Chinese between the ages of 18 and 28 stated they wanted access to continuing education and 41% said considered continuing education the best way to raise salary packages and realize their professional and financial goals. Foreign firms must develop training courses that give employees the business skills they need:
Some of the most successful multinational companies in China, like L'Or�al (LRLCY) and Starwood (HOT), have implemented rotational training programs that give Chinese employees the chance to spend time working in other countries. Overseas training is one of the most prized benefits Chinese employees mention in our surveys. Offering top workers the option to spend six months in France or the U.S. is a smart way to build company loyalty and develop the business savvy currently lacking in many Chinese executives.
Shaun sums it all up thusly:
Foreign companies that remove glass ceilings, tailor their pay packages to incorporate the emphasis employees place on balanced lives and implement continuing education programs will retain China's best employees and generate increasingly significant revenues on their bottom lines.
He's right.
Comments (16)
Read through and enter the discussion by using the form at the endnanheyangrouchuan - May 28, 2007 9:27 PM
Sinocidal may be a huff and puff website but they point out alot of realties of most Chinese staff that makes them completely unsuitable for middle and upper management.
There are always a few hotshots who will excel right away and those "who can be taught" but they are a small percentage of the twenty-somethings in the Chinese workforce. And in big MNC operations there are always mandatory hires who have family in the local or national PSB/CCP/PLA/bureaucrats.
And the hotshots in their 30s and 40s are pulling expat salaries.
MNCs would love to replace expensive expats with local talent, but the truth is there just isn't nearly enough. Lots of bodies, but not alot of brains.
Dave! - May 29, 2007 1:42 PM
That paragraph should read:
[Companies] that remove glass ceilings, tailor their pay packages to incorporate the emphasis employees place on balanced lives and implement continuing education programs will retain [the] best employees and generate increasingly significant revenues on their bottom lines.
Those goals shouldn't be limited to China!
Phil - May 29, 2007 3:32 PM
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 labour, but I'm not convinced.
And Nan must have a point about quality, too. If you're an MNC used to hiring execs out of Ivy League schools, then even a good Chinese university isn't going to cut the mustard. How do you reflect that quality gap?
And the work-life balance? It's always been my understanding that Chinese companies require much longer hours than anyone else. Could be wrong, this isn't my field, but that's what most net comment seems to suggest. So would this constitute a reason for leaving an international company for a Chinese one? (Never mind the fact that the survey is probably hideously wrong - no-one answers these things honestly.)
Some of the other stuff he says in there sounds right, but it seems a bit C- to me.
China Law Blog - May 29, 2007 5:28 PM
nh --
I completely agree with you re Sinocidal. There are definitely people there who know what they are talking about when it comes to China. But, and I think they would admit that they sometimes exaggerate to prove a point and that not all Chinese employees are bad. I do not dispute for a minute that there is a shortage of Chinese employees who understand how to be good employees for Western enterprises, but I think that is all the more reason not to let those who do understand leave your employ.
China Law Blog - May 29, 2007 5:30 PM
Dave!
You are right, which just goes to prove another point I am always trying to make and that is that the business of business in China is in many respects not all that different from the West.
China Law Blog - May 29, 2007 5:40 PM
Phil --
Let me begin by saying that I am by no means an HR expert (anywhere in the world) and it isn't even a field that interests me all that much so I am not even terribly well read in it. So much of what I say is based on what I hear from my own clients. But here goes.
You make a good point about paying US and Chinese employees equally. How can a US company pay its American manager $140,000 and pay its Chinese manager the same, when that $140,000 might be absurdly high? I don't know. I will ask Shaun to answer this one.
I also see where you are coming from regarding the work life balance, but I too have seen the changes Shaun is talking about among the 20-30 set in China. I know that the younger lawyers at the Chinese law firms with whom we work are much more interested in a life outside work than the stereotypical work 16 hours a day Chinese employee. Many of them have spouses with really good jobs as well so it might be fairly easy for them to leave for another firm or to start their own. I have even heard the older lawyers talk about how the younger lawyers don't work as hard as they do (I think this is said by older lawyers everywhere in the world!).
At the same time, I also know that I have seen people in Asia (including Korea and Japan) purportedly work 16 hours a day, when in fact they are working more like 8 and messing around for 8 and maybe what is happening in China is not so much that the youger employees want to work less hours, they just want to hang out at the office less. Again, Shaun, please explain.
chriswaugh_bj - May 29, 2007 7:44 PM
Funny, I think this should also apply to Chinese work units hiring foreigners. Especially that glass ceiling point.
laolao - May 29, 2007 9:26 PM
If you hire a mid-level manager, at least in manufacturing ( a large sector in China) you need to be prepared to pay 60% of what you pay in the USA.
If you pay bonuses for annual goals, and the amount is a percentage of salary, you need to be prepared to pay the same AMOUNT in China. Not percent of base salary.
If you award your Sales people a bonus, which is a percent of sales or profit, be prepared to do the same here in China.
If you don't, then be prepared to receive what you will certainly get. A less than desirable workforce.
China Law Blog - May 29, 2007 9:56 PM
chriswaugh_bj --
Yes.
China Law Blog - May 29, 2007 9:57 PM
laolao --
Makes sense, and you are speaking from considerable experience, correct?
Tim - May 30, 2007 3:07 AM
I liked this article as now we�re talking about the white elephant in the room: the expat package as it is seen from the local hire�s perspective and the racial/passport divide that locals are hitting their heads on. Usually the conversation on local vs expat is from an economic or productivity perspective.
One thing about this article that threw me off and framed his argument a bit askew: China �shifting� from a manufacturing to a service-led economy.
I�d like to see the statistics on this one. China may be shifting its low-value add hub for manufacturing to the interior while attempting to attract high-tech, environmentally friendly, high-value add manufacturing on the east coast and major cities but I don�t see them shifting to a service economy anytime soon. That is not to say that services are not becoming increasingly more important but China would seem a long way off from the mature market economies and the substantial well-educated middle class needed to sustain a service economy.
nanheyangrouchuan - May 30, 2007 8:28 AM
"I liked this article as now we�re talking about the white elephant in the room: the expat package as it is seen from the local hire�s perspective and the racial/passport divide that locals are hitting their heads on. Usually the conversation on local vs expat is from an economic or productivity perspective."
The expat package is necessary because China is such a crap country to live in, period. So what if there are more expat restaurants, bars, improved public transportation. You are also chronically ill and the condition of Chinese society is a tragic comedy that you are exposed to on a daily basis. The same goes for expat packages in most countries of the world, because most of the world's societies are tragic and the country itself is a wreck in multiple ways. There is no other way to coax a middle or upper level westerner, Japanese or Korean (they get some sort of expat package as well) out of their comfy if mundane existence at home.
I knew of a few Europeans who had been suckered by their companies into signing their expat contract when they arrived in China and ended up with a worthless pile of paper and local living conditions. Their relatives bailed them out so they could come back home.
As for paying Chinese staff "more fair" salaries, 99% of Chinese staff is very unmotivated and more concerned with telling everyone about their big job at a foreign company than actually working. The little emporer generation is completely disfunctional and at the same time bitter towards you for being a forienger. The expat package provides you with a psychological respite in your ivory tower because life in China can make you want to kill people, especially when one of your "staff" who got fantastic grades in high school cannot write up basic technical papers in the course of a whole day, walks up to your desk, declares "you must finish this!", pokes their nose in the air, goes back to their desk, sits down and becomes a multi-tasking wizard with online chat and text messaging. Then they quit after 6 months to go to a local firm after lying about what a great job they are doing and the great experience they are getting at the big foreign company.
David Yu - May 30, 2007 8:40 AM
Having enjoyed an expat package in Tokyo, I can say this expat/local divide is not unique to China. Western companies can continue to do this as long as they offer more upside or PERCEIVED upside to their local hires than the local companies do.
But I think employees nowadays are much more informed because of the internet, and it's becoming harder for HR to sell the Koolaid, so in general, I agree with Shaun.
Tim - May 30, 2007 8:56 PM
Nanheyangrouchuan
I think you misread my post. It was not intended to be an argument for or against expat packages; but more of an observation that this was the first time I have heard anyone speak about it in terms outside of productivity or economic arguments.
That is some rant though!
But what interested me more about the article was the assertion that China is moving towards a service-led economy. Any thoughts on this one?
Michael - May 30, 2007 9:22 PM
It's not a "feeling" of prosperity. There IS a prosperity.
If you are worth something, just a bit, and don't like your office color, environment, your boss or anything else you can simply change jobs. With the massive amounts of new businesses opening every day, foreign and local, you will find a new job easily and probably get a higher salary as well.
Why? Because they can.
What is this nonsense about loyalty? The investors/shareholders are normally giving percentage of the profits to the employee? Is there any /guarantee/ the employee will not be fired?
The truth is, that if you are local and THAT GOOD to have companies chase you like that, you can start your own biz and make much more money. I know plenty who do. Why be a salary man?
Jim - June 24, 2010 1:20 AM
I read this old article and it is still relevant. More and more good employees are taking over "western" values, instead of listening to their friends and family members