What's your China strategy?

by External16 Apr 2012

So you are tasked with helping expand your business into China, eh? Many have tried, and sadly many have also failed. Chalk up eBay, BestBuy and the better part of Google on the board. But while these businesses went out with a bang – often with wreaths laid at their China headquarters – because they underestimated their consumer, or in Google’s case, the government, more companies disappear without fanfare, because they underestimate the Chinese employment environment. China is in a serious ‘War for Talent’, and it’s costing (business’s) lives.

Unique Talent Challenges

The War for Talent was first coined by Steven Hankin of McKinsey & Co, back in 1997. Hankin was originally referring to the demographic shift, primarily in Europe and the US, as retirees outstripped new, and qualified, recruits. However, while China is in a war of its own, it is not the ageing population that is the cause – most Chinese retiring today grew up when relationships, not computer skills, determined career advancement. Instead, it is enormous economic growth coupled to the mismatch of Chinese education and international business acumen. The cultural phenomenon of rote learning, a focus on grades before experience, and a society that is only now realising the importance of innovation has caused this mess. So much so, that while 6.6 million university graduates entered the workforce in 2011, Hudson reported that of 670 executives in China 73% stated that it would still be tough to recruit top talent, citing ‘skills shortage’ as the top challenge.

This kind of news is terrifying for Australian and Asia-Pacific HR directors who have the mission to build a workforce linked to a China expansion strategy. But then again, nothing in China is easy, so why should recruitment be any different? Operation directors complain of poor quality, sales directors complain of corrupt buyers, and finance directors complain of erratic changes to taxation and reporting legislation. All this ‘ma fan’ (Chinese for ‘trouble’) is just the barrier to entry. The proverbial ‘toll you must pay’. Accept it, and focus on building a competitive edge – talent attraction.

The steps to recruitment building a talent pipeline in China

Since you will probably be hiring a large bulk of your staff within the youth market, it’s important to understand how they tick. You might be surprised. In 2011 The MRI China Group conducted a survey, which included 2,265 Chinese aged between 25 and 37. One question that drew considerable attention was ‘Why do you choose to remain in your company?’ The top three answers were:

  • Career development
  • Team camaraderie
  • Work-life Balance

‘Pay’ was not in the medal rankings.

Asked what attracts them to a job, a separate study by Aon Hewitt on a similar Chinese demographic reported (as one, two, three):

  • L&D
  • Company reputation
  • Career opportunities 

Again, no mention of salary within the top three motivators.

This should come as a shook for anyone who has spent time in China over the past 10 to 15 years, since job hopping, over the barest of salary rises, were commonplace amongst white-collar workers. Unfortunately, those job-hoppers are still prevalent, only this time it’s less over pay and more over maintaining a 40 hour work week and being home for dinner.

Aon Hewitt’s report, while supporting the research of MRI, is also a reminder that a strong employer brand is beneficial to increasing the access to talent – 20% more by some accounts. But what’s more interesting is the move away from multinational companies towards some unexpected benefactors. In 2010 the Chinese English language newspaper, Global Times, reported that while “just 10 years ago, only about 2,000 university students joined the People's Liberation Army (PLA) each year” that number in “last winter's intake was more than 130,000 university students”. To paraphrase, just ‘being foreign’ is no longer enough. Now, not only do Australian brands need to compete against the Global 1000 companies for top quality staff, but local government and State-Owned Enterprises are now taking a chunk of the talent.  

But smart (and that means tech-savvy) companies need not fret. They understand that nowhere is there a bigger internet penetration than China, with 384 million active users – an irony, that is not lost on many, who complain of internet censorship. But while Facebook, Twitter and Youtube (amongst a growing list of around 2,600 sites) are blocked in China, there are home-grown SNSs (that’s ‘geek-speak’ for Social Networking Sites) that are ideal platforms to connect to your potential employees and build a strong employer brand. Sina Weibo and Tencent Weibo are Twitter copies, and Kaixin and RenRen both mirror Facebook. While LinkedIn isn’t blocked (although it’s had its ups-and-downs in the past), it also has a decent Shanghai-born competitor called Ushi. LinkedIn boasts around 1.5 million active users in Mainland China, compared to Ushi’s 700,000. However, Ushi’s founder, Dominic Penaloza, boasts that half of LinkedIn’s China-based numbers are expatriates, and they are not growing. Ushi, by contrast is predicted to “hit three million users in China within a year”. That’s why Australian businesses are recommended to add ‘social media expert’ to all HR job descriptions.

But then again, maybe you won’t target Chinese at all. That might sound strange, but thanks to the GFC, the continued stagnation of economies in Europe and the US, and the pull of China as the ‘place to be in business’, foreigners are eager to take up jobs, often at close to or equal to local wages. Says Chris Hughes, a director of healthcare insurance company, PIBB, “It’s possible to hire 20 foreign insurance experts for around 25K-30K Chinese yuan. But for every 20 experts there’s only one Chinese, and so the local talent expects 80K or more.” This opinion is also voiced by the COO of Bayer Healthcare, who says that he is struggling to hire senior Chinese managers, as their wage requests were too high. While Bayer wanted to hire locally, they still had to bring over Europeans to fill senior positions.

You can now see how so many foreign companies have stumbled. While there are hundreds of books focusing on doing business in China (I should know, one of them is mine!), most are simply out of date before they hit the ‘New Release’ racks. What separates the heroes from the zeroes is the ability to hit the ground with both a plan and the flexibility to update it on the fly. In China’s 5,000 years of history nowhere was it written that business here was easy. But one thing is for sure, China will be here a long time after the ‘Googles’ of this world have come and gone.

About the author

Morry Morgan is the author of 'Selling Big to China', co-founder of China-based ClarkMorgan Corporate Training and publisher of Network HR magazine. Born in Melbourne, he has been based in Shanghai since 2001.


Further information

Through early May Morry Morgan will be presenting in Melbourne and Sydney on his ‘What is your China strategy?’ tour.

Dates are:

May 1 – Melbourne, Regus Business Centre, Level 27, Rialto South Tower, 525 Collins Street.

May 3 – Sydney, Regus Business Centre, Level 37, Citigroup Centre, 2 Park Street.

E-mail: admin@clarkmorgan.com

Phone: 03 9650 1598




  • by Michelle Jose 17/04/2012 12:22:09 AM

    A great article and one that is very topical given Australia's increased dependence on China, and vice-versa. I know that a lot of talk in my company is on how we can better align with China.

  • by Joshua Rogan 22/04/2012 1:25:33 AM

    Excellent overview of the talent challenge in China. The 'job hopping' is one of my biggest frustrations, but I've always thought the root cause was salary. I'll now change my tactics