Western Companies Are Frittering Away China Employees. Or Not.
Fascinating article at Access Asia on how Western companies are, at the exact worst time, cutting back on their employees in China. The article, "Are Foreign Brands in China About to Give It All Away??" says that many Western companies, run out of places like London and New York, are cutting back on their China operations so as to preserve cash and save money at home:
By and large, in most sectors of the retail business, they had the locals on the run both as brands and retailers. Then last year’s financial crash. Since then two mantras have surfaced – the West is in freefall; China is surprisingly robust. Our sales are declining in the West; growth is still apparent in China. Good news then for those teams in China who did all the hard work over the last decade?Eeeerrr, no. Head offices from London to Paris to New York and back again panicked – big time. Cuts were demanded; cost savings had to be found – redundancies implemented. And it seems a sort of warped, nonsensical political correctness has been in vogue on the chopping block this season. We’ve seen one experienced brand brand/retail manager after another in China fired and slung out on the street. Why? Every country office must implement a 10% head count cut (it varies from company to company but...), regardless of performance, in the dubious name of “fairness”. The result is that an office in Europe or America, where sales are falling through the floor sacks 10% of management – and then so does the office in China, despite having double-digit growth!! This is apparently fair and equitable in corporate speak at the moment.
The article goes on to rightly point out what a big mistake this is because these Western companies are losing massively experienced employees to their Chinese rivals.
I completely agree with the article's analysis, but this laying off of employees is not at all what I am seeing with my firm's clients. If I had to breakdown what our Western clients are doing in China (and I am admittedly pretty much guessing here because I have not been keeping track, but I do nearly always ask, "how's business?), I would say 60% have frozen hiring, 30% are still fairly actively hiring, and 10% have engaged in layoffs. Of all these numbers, I am most confident of the laying off one because I think we are nearly always called in to assist on the legal aspects of layoffs, but we certainly are not called in for freezes and only rarely are we called in for hiring (because our clients usually can use the employment contracts we previously drafted for them).
So why the big difference? I think it is because most of our clients are small to medium sized entities, none are from New York City or London, and very few are directly connected with either the financial or real estate industries.
What are you seeing out there? Are Western firms laying off employees in China, freezing their hiring, or hiring?
Comments (5)
Read through and enter the discussion by using the form at the endanother anon - June 11, 2009 11:34 PM
Maybe the home offices have come to realize that their experience expat managers in China have long inflated the requested budgets so they can skim some for their own personal use/side enterprises.
It never hurts to rotate the stock and foreigners in China get stale awfully fast.
Cup of Cha - June 11, 2009 11:58 PM
Dan-
I see pretty much what you're seeing. They might not be hiring as fast as before, and the 20-26 crowd is thinning out, but I have not seen all of these "old China hands" on the street begging or switching to work for Chinese companies as he claims.
I find it a little odd that this article gives zero examples. What are some of these Chinese companies scooping up the talent and where from? It has probably happened somewhere, but I have hardly seen the mass exodus he seems to describe.
Hang - June 12, 2009 12:04 AM
I can confirm that Western firms have frozen hiring. I've talked to 5 head hunter firms based in Beijing last month. They told me their foreign clients had frozen hiring.
The Western auditors, called "the Big Four" in China, are firing employees, which has been the front page news for a while. They also used LAP (leave of absence program) to request employees to take long leaves without pay.
By the way, is there any western firm hiring now?
Jack S. - June 12, 2009 12:48 AM
Freeze hiring - Yes,
Natural attrition - Yes
Layoffs - No (you'll recall China has strict new Labour law)
Budget cutbacks - Yes. I'll agree that the global economy and the China economy are not in synch (indeed haven't been so for many years) so this is the most difficult to accept, but as part of an international group, you are obliged to carry out many orders you can't rationalize or sometimes don't agree with.
What is most interesting about this phase is that it also precurses the first moves of many (cash-rich) Chinese companies into international markets. Witness all the interest in the assets and brands of global auto makers - perhaps we can see more discussion on that. Again putting a different perspective on the old line "Act Local, Think Global"
Chris - June 17, 2009 9:23 AM
Our foreign invested SME business in China remains solid, sales growth still OK though half the rate of the past 3 years. No panic, no layoffs and a number of new hires. However, HQ also tough and with every new hire we need to very clearly demonstrate a growth opportunity, solid margin and a healthy return on investment.