Shaun Rein, founder and Managing Director of China Market Research Group, based in Shanghai, had the following acticle published in for Forbes Magazine: "How Multinationals Err In China." The article arises from interviews Shaun's company recently conducted with senior executives of multinational corporations (MNCs) and it focuses on three common human resource (HR) mistakes MNCs make in China.
He raises some valid points but I find that he is painting the picture of the market here in some pretty broad strokes. The article is worth a read and you can get it on Forbes.com by clicking the Title of this post. Whle 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. The companies that do this are able to get the best. My clients use a number of tools to do this, signing bonuses, deferred compensation models, savings plans, children's tuition payments... The point is to be creative and to make room for the best availbale candidates in your organization rather than creating salary bands and uiform pay packages that will hinder recruitment.
From the article: 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'Oréal (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.