Shortage of Senior Staff in Mainland China

This week we wanted to publish a recent article which appeared in the South China Morning Post regarding the shortage of senior talent available to firms in the mainland. It highlights a growing problem that many of our clients are experiencing as they look to develop their businesses in China. We would be keen to hear your comments and thoughts on this article and whether your company has experienced similar situations.

MANAGERS WITH RIGHT STUFF A RARE FIND

by Jonathan Story, published October 1st 2011 South China Morning Post

Companies establishing a mainland office are struggling to recruit senior staff with the suitable mix of skills, qualifications, experience and language

“If you can’t make the people issues work, forget it.” That, in a nutshell, is the view of business people with experience on the mainland.

Companies setting up there report that finding local mainland staff with the right combination of skills, qualifications, experience and language, often English, is extremely difficult. The pressure on recruitment is as intense as the competition for the still relatively small pool of mainland senior management talent. McKinsey & Co, the global management consultant firm, estimates that while by 2015-20 Chinese companies with global aspirations will need some 75,000 senior managers with international experience, there will be only 3,000 to 5,000 potential candidates that fit the bill.

The challenge is to find candidates on the mainland with the right combination of qualifications, skills, experience and language for a particular position, and establishing those criteria is important because language can sometimes be a red herring. A common trap is to hire people whose language ability is good, but who don’t necessarily have the appropriate bundle of skills.

And it is critical to recognise when an appointment isn’t working out. Consider the experience of Kristina Koehler of Klako Group, which specialises in corporate services for the mainland market. She tells a story of a German client who was setting up a sales office in China. The client hired a Chinese general manager who had spent several years in Germany, and almost seemed more German than the other company officials were. He was posted to China, but it became apparent that he lacked the people skills to do the job. After a year and a half, he had grown the China office to 11 people but headquarters had finally had enough. They fired everyone, and started all over again.

Chinese universities graduate 250,000 engineering students each year, and many foreign companies have built relationships with the most prestigious universities to try to beat their competitors to the cream of each year’s graduate crop. The graduates know their theory, but foreign companies find it valuable to sponsor research and training to develop the skills they need.

The criteria for recruiting to a particular position may include the relevant skills, such as length of experience, market knowledge, or experience working with suppliers. But even more important are the candidate’s integrity, their personal values for their fit with your company culture, and their readiness to learn. Skills can be taught, but attitude is hard to change.

The bottom line is that companies have to develop their own staff, and recruit people who appear to be trainable to the required standard. The type and amount of training offered will be one of the tools to attract the best candidates. Training does not come cheap: B& Q, a Britishbased retailer, expects to spend the equivalent of 15% of the first year’s salary of a new hire on training, with new employees spending their first three months shadowing other employees. The research and development centre of Denmark’s Novozymes may be about new products, but it is also focused on selecting, training and developing people the company hopes will become senior managers in the future.

But once you have spent the money and time giving your staff the analytical, interpersonal and other skills they need to compete in a global business world, there’s a new problem. As Heinz Gaugl of RHI, the Austrian producer of heat resistant products, says: “ as soon as you train someone, their market value goes up.” Headhunters are everywhere, Chinese staff send out their résumés on spec to test their market value, and competitors often will offer your best employees more than double their salary to move.

With turnover of staff at more than 15 per cent – I have heard of cases where it reaches 90 per cent – retention is a big headache. Salaries have to remain competitive, but the money is only part of the compensation package. The mainland’s move towards privatisation has taken away the job security and social benefits for life, the “ iron rice bowl”, that mainlanders had taken for granted, and employers are now expected to shoulder some of the burden. Housing, transportation to and from work, subsidised meals and medical insurance, for instance, are common.

Then there is the sense of belonging. A company that shows commitment to developing its staff is demonstrating that it takes a long-term view, that the employee is going to be part of the “ family” for a long time and will be able to grow within the group. The mainland is seeing a religious revival, including ancestor worship, where the importance of the family past and present is joined by thoughts of the family’s future. Companies need to tap into this cultural desire to belong to an extended family.

Career development and opportunities for advancement are the most important reasons for staying in a job. Advancement, new titles and greater responsibilities are a way in which the company can give “ face” – meaning respect – and the employee can gain “ face” in front of his or her colleagues, family and friends. Employees expect to progress quickly, and must be seen to do so, and this can be demonstrated by adding extra stages in the hierarchy, new titles and additional reporting layers. Sending senior staff overseas is another way of demonstrating how much the company values them.

And here is the paradox. In the last resort, what matters for companies wishing to retain their mainland white collar staff is that careers be seen to be open all the way up to the board level. That entails a big investment in training. Yet staff may see that senior positions are still largely filled by expatriates on the grounds that local Chinese managers are simply not yet ready to take on strategic roles. The Chinese will assume that they can only go so far before an expatriate stops them advancing any further – and if they see that glass ceiling as immutable, they will leave. And if you cannot retain your staff, you will never be able to localise.

So to buy time, you have to earn trust. If you can do so, you will be erecting the necessary barrier to exit, whereby your staff will know that it is a good thing to be with your company, and an unknown to leave for another. In the longer run, you’ll need to be planning ahead to internationalise your board.

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