Talent in China

Mergers & Acquistions

Frank Mulligan — Thu, 23 Apr 2009 23:10:48 -0400

Over the past decade we have heard a lot about how Human Resources must get a ‘Seat on the Board’.

This would imply that HR practitioners should be involved in all strategic issues such as Mergers & Acquistions (M&A), downsizing, strategic planning and so on. The move in this direction has been inchoate, but it has been happening.

Now, however, we are seeing that the progress that has been made is being rolled back a little by the current economic crisis. According to Towers Perrin, companies are rushing through M&A deals, and along the way the softer issues, like company culture, are being forgotten.

If HR were really on the board, this would tend not to happen.

According to the Towers Perrin research, the average duration of Mergers & Acquisition deals in 2007 was 142 days. In 2008 it dropped dramatically; to 80 days.

Increasing the speed of acquisition is natural and normal in the current climate. If you don’t move quickly enough you are likely to lose the race to another company that wants to buy cheap. But the downside of this snatching, the research suggests, is that some issues, like execution and succession planning, are being pushed through at speeds considered unthinkable (my italics) even a year or so ago.

Towers Perrin suggest more haste, and less speed.

After-the Fact Due Diligence

Worse than the increase in speed, they suggest that proper due diligence is now an after-the-fact process, which is an obvious contradiction in terms. Due diligence is now the means by which companies determine what they have actually bought.

Finally, they suggest that the soft issues, like cultural integration, key talent acquisition & talent retention, are simply being put aside until the acquisition is completed. What is important now is to snap up any bargains that are on the table. Even if the company is not exactly what it claims to be, it is likely to offer a lot for a little.

They point to 3 critical issues are being missed, and that must be kept in mind during the M&A process:

Retain top talent. The most talented people want to work for top companies. Determine high performers; pay them what they’re worth, and determine additional incentives. You’ll be ahead of competitors that are quick to clean house and inadvertently lose key employees
Be transparent. Communicate your vision for the company and what changes are on the horizon. The sooner employees know the strategy, the sooner they can become a driving force behind it.
Manage stakeholder expectations. The hastiness of current M&A deals has led to even more uncertainty and questions upon change in control. Make sure stakeholders understand that the organization will need time to solidify integration details after the deal closes.

Cost Cutting Goal Always Just Out of Reach

Frank Mulligan — Wed, 08 Apr 2009 23:06:48 -0400

The biggest challenge facing HR right now is the relentless pressure from management to find new ways of cutting costs.

This is like one of those nightmares where the goal is tantalizingly close but simultaneously seems to be getting away from you. Bad economic news keeps coming; further cuts are deemed necessary; and previous success in cutting costs is quickly forgotten.

For political reasons the issue of redundancy is off the table for State-Owned-Enterprises but even for local private companies and foreign companies, redundancy for knowledge workers is definitely a final, final choice. This is true because with this kind of redundancy the intellectual property and core competence of your company walks out the door to your competitors.

With the fall in demand from the first world countries rippling across to China, avoiding redundancies may no longer be an option. Some HR have made the cut already but most have not had to take such drastic action yet.

As a stop-gap Human Resources staff have cut the contingent workforce; whittled down or eliminated bonuses; introduced a hiring freeze; banned all travel; shortened working hours; forced staff to take outstanding holidays; localized expatriates salaries; introduced car pooling; cut training; cut children’s education subsidies; canceled support for MBA programs; reduced health insurance cover; pushed employee social contributions (4 Funds) back to the employee; and hired interns where they would normally have hired experienced professionals.

Now it seems the only thing to do is to sit tight and hold on but there are more savings that can be found, if great effort is made to face them. With so many options used up already, this can seem like an impossible task.

Game’s Not Over…

A recent study, issued by Wharton professor Jonah Berger and Devin Pope, gives support to the idea that solutions can be found, even when it seems impossible.

The study was based on 6,000 recent college basketball games in the US and the focus was on teams that were trailing by a small margin at half time. Based on statistical analysis, those teams should win only 46% of the time, but the authors found that they won 51% of their games.

Somehow, out of the depths, these teams found that extra ’something’.

The authors suggest that this has lesson for HR. They think that in the workplace employees should be more motivated and thus perform better when they are close to, but just short of, an important goal.

In the present context, this would mean that HR gets the courage and creativity to identify and face the really difficult choices in the cost cutting exercise.

These would include shortened work weeks, temporary plant closures, and unpaid leave. All of these are legal options in China provided you follow the China Labor Law . These choices would always be on the table but they are hard to face because there is such an admission of defeat involved, and a loss of face.

Looking at things from the point of view of winning a basketball game though, maybe they are the equivalent to the three point throw from half-court. It’s a huge risk; it’s takes a brave person to try it but it may be the only way of avoiding actual redundancies.

China's Lewisian Turning Point

Frank Mulligan — Wed, 21 Jan 2009 23:56:53 -0400

At a recent event on Web 2.0 and HR, the subject of hiring freezes came up.

I mentioned about the impact of the Lewisian Turning Point, and someone asked me how it works, and how it is connected with the current (serious) hiring slowdown in China.

Scouring the net for graphs that illustrate the Lewisian Turning Point produces flowers called Lewisia. Finally, I found a graph, and this gets us half-way.

The source is Deloitte so we should be able to rely on it. The bars show the demand and supply for labor in China over the last 8 years. The increase in ratio of demand over supply is seen from the line drawn above the bars. It shows demand/supply fast approaching 1.0.

According to the theory, the supply of new labor from the countryside is not infinite. Eventually it has to decrease as more and more peasants move to the cities to work. Then industrial wages begin to rise, and quickly.

Back in 2001 there was still enough spare labor capacity in the Chinese economy, and salaries could be held in check, by comparison to other countries. Salaries increased after 2002 in tandem with the shortening of the supply, and to the point where China was no longer the first choice for Foreign Direct Investment (FDI).

That point appears to have been reached in 2007, and then the China Labor Law kicked in and increase staff costs more. This was followed immediately by the exit of many low-tech, labor-intensive companies in late 2007 and early 2008.

The current crisis will have shifted the graph downward, and reduced the labor demand, but it will not have fixed the issue of skills shortages. This take years to fix and many of the people on the labor market at the moment are not the ones that your company is looking for. There is no easy way out of this, as infrastructure companies are discovering right now.

“Plus ça change, plus c’est la même chose”, as the French say. Everything changes, but everything stays the same.

Staff Reduction to a Plan

Frank Mulligan — Tue, 23 Dec 2008 03:23:42 -0400

So here you are, at the end of the line.

You have taken all the steps you can take to reduce your costs, as illustrated by the recent Watson Wyatt survey on HR programs (below).

Business continues to fall, and now comes the next step: downsizing and staff termination.

This is likely to be the most difficult task facing HR professionals in China right now, especially when staff termination, or its euphemism ‘employee separation’, is something that you can get really wrong if you take a simplistic approach to it.

The issue is the strong tendency in China for personal and professional lives to overlap. Often there is little difference between the two, but this is one area where a strict demarcation is required between your role in HR, and your friendship with the staff that you will be letting go.

This is especially true since the introduction of the new China Labor Law. If you don’t think this one through, not only will you cause yourself psychological distress, you will also take the risk of a fine from the government, or a protracted legal disagreement with former employee(s).

Letting Go

The new labor law is informative on the subject of terminations. It specifies two types: termination with notice, and termination without notice.

Termination without notice is permitted if an employee breaches company discipline, such as if they break written employment rules, commit a crime, or damage the company in some way through their own actions.

Termination with notice is allowed if the staff member cannot perform their job, and has been moved to another role, or has been given training which has not improved their performance. But what is more important here is the fact that the new China labor law allows companies to terminate staff with notice when major changes have occurred in the “objective circumstances” of the company.

No one seems to be that clear about what this means exactly but it certainly would apply if you are facing the possibility of bankruptcy.

Planning Ahead

The issue of terminating staff is like any other issue that you have to deal with. It needs to be thought out beforehand, and it needs a plan, or should I say two plans.

The first plan simply specifies who exactly is going to be terminated. The process that you use to arrive at a cut list is entirely an internal matter, and this is something that can be dealt with by HR in conjunction with line managers and management.

This process needs little introduction but it should be noted that when you undertake mass layoffs of more than 20 people, or 20% of your total staffing, you need to inform the union beforehand, consult with employees, give 30 days notice, and report your plans to the local government authorities.

If you have dealt with the administration issues then you can move on to the second plan, which is the more important one. This is the plan that you will use for the day that you will do the actual firing.

You need to anticipate the various contingencies, and sense the responses that you will receive. The objective is to have a professionally managed meeting that ends the business relationship with the staff member, without the angst involved in a long-winded explanation of the whys and the wherefores.

It may sound callous but professionals who have done this before will tell you that the cut has to be clean and swift, for the sake of both parties, not just to relieve the management of any potential distress. It’s a two way street; one that I have journeyed before, on the receiving end. The company should definitely look to avoid a costly labor dispute, but at the same time staff should be spared the pain of hoping against hope for a possible reprieve.

The best advice that I have seen on this is to call the staff together in one place, and break the news to them one by one in a separate private area. Your objective should be to listen to what they have to say but not get involved in a defense of the company’s decision.

Recognize their pain without engaging in too much cloying sympathy. Absorb their emotions and allow them to express themselves. This is not about you so no one should have to hear about how this happened to you in the past. At all times maintain a positive tone, but tell them that it is definitely over. Emphasize how they will be able to get past this, and get a new job. Once they appear calm then discuss the severance package.

Finally, get them to sign the separation agreement on the spot. If they are not happy with the amount, send them to the finance department, and move on to the next person.

If you do it this way you will get through what I would hope would be the roughest day of your life.

Hiring Freezes (China)

Frank Mulligan — Thu, 23 Oct 2008 22:52:51 -0400

Brrr! Even though the sun is shining, it’s cold. It’s always cold when the economy slows, and it’s not just psychological.

Hiring freezes are in place in many of the world’s leading companies, and on a world-wide basis. This means that corporate staffers and line managers cannot hire anyone for a fixed period of time, or until an open-ended freeze is cancelled.

Here in China, where we expect the economy to ’slowdown’ to ‘only’ 8% growth next year, there has always been a way of getting around the freeze. But right now it’s getting harder and harder to keep the ice from forming.

Only one year ago the talk was all about the War for Talent in China, but in the not so distant future some HR staffers will be expected to deal with the consequences of slow or negative internal growth, and this is something few of them have ever had to do in the past.

If you find yourself in this situation, what should you do?

China is Different

The starting point, I believe, is to accept the reality of the market. Many people in China still seem to be in denial about the consequences for China of the world slowdown. They hold desperately to the notion that China is somehow ‘uncoupled’ from the rest of the world.

So a first step would be to smell the flowers.

Once you have accepted the situation you need to take action, and the first step is a think-through and a mental modeling of your company’s functions or departments, and the value they offer.

The battle that is ahead of you will be based on the fact that management often think that if they cut staff numbers, any numbers, they can report better financial ratios to the stock market in the next quarterly report. You have to resist staff reductions that are unsupported by data, and you need your own data to do this.

The world’s economy is surely heading into negative territory, and some countries are already in recession, but China will still be rolling along nicely. International companies tend to apply a single brush to all countries, but you have a good rationale for pushing back against this. Hiring freezes are generally issued across the board ,and take no account of the actual situation on the ground.

So map out your understanding of your company’s HR challenges such that you can communicate them to management, and let the management team flesh out the details of where changes and cuts should be made. The final HR plan should incorporate the thinking of as many people as possible, and you should expect a contentious meeting but it’s a process that you are in control of now.

Englightened Self-Interest

Hiring is Job Number 1 in China. Many HR departments are actually cleverly disguised recruitment functions.

As soon as hiring is reduced to any significant degree, HR will be decimated. Many of your best people will move into different areas or industries, and when you need to rebuild your HR team in a year or two it will be virtually impossible. Fight now and save yourself large amounts of unnecessary work later.

A second, selfish reason for creating a HR plan is plausible deniability. Call me cynical but you want to be in a position where you can show that you are part of the solution, not part of the ongoing problem.

For example, your HR plan should be looking at ways and means to both improve quality of hiring, and ways and means to show that you are improving quality of hiring. The same reasoning applies to:

- new hires salary (reduce)

- overtime (reduce)

- hiring costs (reduce)

- retention (improve)

- business culture (strengthen)

- performance (look for more)

- training (rationalize).

Ongoing Skills Demand

Finally, businesses in China will not find that hiring in China has suddenly gotten easier, and all the wrong hires rectify your retention numbers by resigning en masse.

Exactly the people you want to keep will still be in demand, the people-that-you-have-wanted-to-fire-but-were-afraid-to-do-so will be digging in their heels, and increasing their seniority. China’s new labor law means that you cannot be so quick to fire as you might have been in the past.

Soon you are going to need people who can really deliver, and these are not the ones who sit, drink tea, make personal phone calls, and wait to be told what to do. You will be dealing with challenges that many people have never seen before, and experience will be at a premium. A steady hand is going to be needed at the tiller, and judgement will be key.

People with these skills are in short supply. They always are.

Passing for Competent

Frank Mulligan — Sat, 13 Sep 2008 04:15:17 -0400

Bookish people, who study hard to achieve multiple degrees or other educational certifications, are to be admired for their effort.

As a result of all this work, these perpetual students are competent in a lot of different areas. They know a lot of theory, and are very fluent in the language of their specialization. They are very common in China.

The best of them can be seen as a ‘font of wisdom’ for other members of staff. Unfortunately, some may just pass for competent because they have only immersed themselves in the language of their field. They have the words but not the insight.

We all know that people who study well are not necessarily the people who deliver well. Not unless they can combine that study with practical experience. This is not an anti-intellectual bias. Often the people who deliver are the ones who have stopped studying and gotten busy doing.

You see this at interview where candidates who present with great looking Resumes turn out to be duds. Behavioural interviewing can sort out the wheat from the chaff because it forces candidates to go beyond the language of the industry, and get down to the connections, consequences and relationships between elements of the industry.

At this stage we all know how to write up a behavioral interview , and note the differences between those who talk about ‘me’ and those who talk about ‘us’, between those who say ‘called a meeting’ and those who say ‘told my team what to do’.

Dig Deeper

To take things further I would suggest there are a few other issues that you need to look for in interviewees’ responses.

The first is a willingness to make mistakes, combined with a willingness to admit them. No one has a mistake-free career and if we were to be brutally honest each of us would have to admit to a huge number of mistakes in our careers. If you can admit a mistake it is more likely that you will be willing to learn from that mistake.

Those in possession of high levels of knowledge should be able to challenge the status quo, and to see things in a different light. That is surely what they have been trained for. No industry is so perfect that it runs like a Swiss watch. Trends and currents offer opportunities for those with insight to take advantage. If your candidate cannot see these issues then they only know the words; they spent their time learning more when they should have been trying out what they learned.

The presentation of new evidence should also cause interviewees to change their thinking. Often it doesn’t because the interviewee is deferring to you. But if the interviewee defers to someone that he will only meet for an hour or more, how likely is it that they will challenge their superiors when they are wrong?

One of the ways you can play this up is to act as the outsider, the one who has little knowledge of the industry. Put forward a weak understanding of the industry, and the good candidates will challenge you, and inform you. They will do this in such a way as not to offend.

Another way to provoke a response is to offer a hypothesis that is unsupported by evidence. Again, the good people will challenge you, and the duds will totally miss the fault in your analysis because they are more focused on looking the part, and forming a relationship with you. If you are given a lot of MBA-speak as your answer, this is sure sign of weakness, unless the candidate has recently finished an MBA.

The final point would be to look for the candidate’s ability to transfer knowledge from one area to another. Narrow specialists learn fundamentals about their broad science or industry, and they should be able to apply these fundamentals elsewhere. This one is hard to plan for because you cannot be sure what knowledge the candidate will present to you.

Proviso

The corollary here is that many of the competent people that you interview are not necessarily able, or ready, to do a dog and pony show for you at interview. If they feel that you do not have the necessary industry skills, or age-related experience, they will often shut-down and give you what they think you want.

So either you have the skills and engage candidates in a deep conversation about your industry. Or you don’t. In which case you use this as a way to get them to explore their industry, as your teacher.

Passing for competent works both ways.

China Earthquake - Ways to Help

Frank Mulligan — Mon, 19 May 2008 05:49:49 -0400

As Brian Fenerty pointed out on Recruiting Techniques in China, this blog is supposed to be focused on talent issues.

But when something this traumatic happens, it's hard to focus on hiring and retention. Oddly enough the earthquake is having an effect on workforce planning because so many Sichuanese are returning home to find relatives. So much so that factories on the East Coast of China fear worsening labor shortages. I guess my talent radar never really switches off.

We are far away from the disaster here on the East Coast, and there is a disembodied sense of powerless in the face of nature’s power. There is also a welcome outpouring of financial support for the victims of the earthquake in Sichuan.

Obviously, helping other people is not a new idea in China but charity as a practical concept is still little understood as there is no history of charity in China. If no one has ever done something before it is unlikely that they will feel an urge to do it. Until they just have to.

Now that the floodgates are opened there is reputed to be close to US$1 billion in the pot. But this is a very small amount when you look at the magnitude of the problem. Much more is needed.

There are online destinations where you can help but it can be difficult to find sites, and figure out how they will use the money. Most sites are about donating cash but some allow you to show moral support simply by clicking a banner, or entering missing people’s names, or giving blood, or sending an SMS which has part of its cost routed to a charity.

These links might provide you with some ideas, or some alignment with how you actually want to help. Some may need a proxy:

US REDCROSS http://www.redcross.org/news/in/profiles/Intl_profile_ChinaEarthquake
CHENGDU REDCROSS http://www.chengduredcross.org
CHINA CHARITY http://www.chinacharity.cn/wzdefaultservlet
MEDECINS SANS FRONTIERES http://www.msf.org.hk/public/main2
GOOGLE SEARCH PLATFORM http://www.google.cn/intl/zh-CN/qinren/cse.html
WORLD VISION http://donate.wvus.org/OA_HTML/xxwvibeCCtpSctDspRte.jsp?section=10025
MSN & TOYOTA http://info.msn.com.cn/caihong/rainbow.html
CARE FOR CHILDREN http://www.careforchildren.com.cn/appeal/
TIANYA http://cache.tianya.cn/publicforum/content/free/1/1224965.shtml
CHINESE CHILDREN http://www.chinesechildren.org/Sichuan_earthquake.aspx
CHINA REDCROSS http://redcross.org.cn
CWDF http://www.cwdf.org.cn
SNDA http://www.sdo.com/08earthquake/theme/index.htm
CAFANC http://www.cafanc.org/donate/
CCTF http://www.cctf.org.cn/English/index.htm
MERCY CORPS http://www.mercycorps.org/chinaearthquake/?source=1062
SOHU http://news.sohu.com/20080512/n256808674.shtml
CRCF http://www.crcf.org.cn/gb/jianjie/jkindex.asp
OXFAM https://www.oxfam.org.hk
BULLOG http://www.bullog.cn/blogs/liuyanban/archives/136782.aspx
ONE FOUNDATION http://www.onefoundation.cn/zhuanti/080512dz/index.htm
CFPA http://www.fupin.org.cn/en/index.asp
SCF http://scf.88547.com/home/
CPGP http://www.givingchina.org/GiveNow.asp
GLOBAL GIVING http://www.globalgiving.com/china.html
HALF THE SKY http://www.halfthesky.org/journal/?p=88
CHINA MERCHANTS BANK http://live.cmbchina.com/webpages/tda_sc/index.html
YEEPAY http://www.yeepay.com/mlove/
HEART TO HEART http://www.hearttoheart.org/give.aspx?tween=false
BLOOD DONATIONS http://shanghaiist.com/2008/05/14/give_blood_and_help_the_earthquake_victims.php
TSINGHUA FOUNDATION http://tsinghuafoundation.org/earthquake08/index.html
DO YOU HIKE http://www.doyouhike.net/forum/512dizhen/296659,0,0,0.html
OSCCF http://www.osccf.org/donation_method.aspx?lan=cn
SERCOC http://web.wenxuecity.com/BBSView.php?SubID=finance&MsgID=1107371

More information can be found on Ifgogo, CNReviews, ChinaLaw, Shanghaiist, CrossRoads, Danwei, China Beat, Global Voices etc. if you are really interested.

If you have anymore sites to link to, you can email me at frankmulliganchina at gmail dot com. If there are any issues with any of the donation sites in the list above, an email to the same address please. This post does not constitute legal advice …. So give with care.

Charity Navigator’s ratings might help you sort out the wheat from the chaff.

IBM Human Capital Study 2008

Frank Mulligan — Tue, 01 Apr 2008 00:25:36 -0400

IBM recently spent literally months discussing talent issues with senior HR executives from all around the world.

The conclusions of the IBM Human Capital Study 2008 shine a light on a whole variety of HR issues and are definitely worth the effort of registering to receive the PDF report. The people they interviewed were very senior, and had a strong grasp on what it takes to succeed. There is strong relevance to China as well.

The basic thrust of the study is that to enhance workforce performance you have to create an adaptable workforce, with a leadership that can guide individuals effectively, an integrated talent management model that covers the whole employee lifecycle, and the right information to deliver insight and measure success. There are a fair number of bromides in there, but the detail of the report backs up the conclusions.

For China there are a few specific results that need addressing.

Leadership That Lacks

Overall in the Asia Pacific region the respondents cited a need to focus on leadership issues. Bench strength is an oxymoron in Asia Pacific, and 88% of respondents in this region cited leadership as an important issue, as compared to 76% globally.

This makes sense when you have a rapidly growing economy that is not given sufficient time to produce seasoned executives that can deal with daily operations, and lead at the same time. In China the challenges are simply greater than the rest of the Asia Pacific region, and managers not only have to walk and chew gum; they have make sure everyone else has gum too ... and are happy with the brand they are chewing.

Just holding on to people is sufficient to keep China managers busy.

The problem is so serious that respondents say that the lack of leadership capability is a significant barrier to growth for many organizations and industries (my emphasis). This was a worldwide problem.

China appears to be having success with executive mentoring but the authors think this is not a scalable solution to the overall problem. It works for individual companies but there is also a well documented shortage of professional coaches and mentors in China, and elsewhere, so this is only a temporary fix.

Salary & Career That Lack

Compensation was a major factor for this region, in contrast to other continents where is was much lower down in the rankings. 46% of respondents in Asia Pacific said that compensation plays a strong role in attracting candidates, as compared with 33% in the rest of the world.

Staff turnover was up all across the board. A majority of HR Directors felt that they had what it takes to compete in the War for Talent, but it is worth noting that the vast majority of the respondents have a big arsenal of tools at their disposal. You may not.

This would start with a big brand that can bring candidates in the door, after which they can be sold on the advantages of the hiring company. Respondent HRDs can offer extensive operations that offer career potential, and a smorgasbord of challenging projects.

They can also be flexible on salary offers at the senior level, and have sufficient depth in their Organizational Chart to be able to finesse titles. This can be a big success factor in countries like China, where the job title is often as important as the position and salary.

The most important element in reducing turnover was seen to be career development, but this was listed lower than salary. 53% in Asia Pacific thought it important, versus 43% in the rest of the world. So you have to deal with the salary issue first before you can move up the Maslow Hierarchy of Needs.

Career development of its own accord will not deliver for you, except in some cases at the higher management levels.

Measures That Lack

Among the respondents there was a keenly felt needs for more data (metrics). Current talent shortages have a context and must be seen as part of the overal talent management process. Metrics for future talent needs are still lacking, and this makes it difficult for HR to deliver on current business needs.

To put it simply, if you don't know what skills you will need in the future your current hiring and retention is likely to be skewed. Operational effectiveness will then be compromised.

HR needs to have a better understanding of operations so that they can align the skills that employees offer with the business priorities of their company. An additional difficulty is that companies are currently asking staff to do-more-with-less, so HR has to know how to produce multi-skilled employees, before it's clear which skills will be needed.

The HRDs who responded to the survey seem to feel that they can do all this, but only if they have the human capital data to give them direction. They need insight into systems, processes, strategies, objectives, technology developments, and a whole variety of issues that they are blind to right now. The study concludes that HR is qualified and ready to take the lead in human capital management, despite contrary beliefs.

HR Not Lacking

In conclusion I would say that, first, you give the basic data to HR. Then you criticize them for not being effective. Until they get the data, they are reasonably well covered.

I say reasonably because the movement towards the use of metrics has been going on for decades, and every other department is onboard. Part of the problem we see is due to HR's resistance to most-things-new-or-different.

We all have a choice here.

Hiring Still Strong in China - Hudson

Frank Mulligan — Sat, 15 Mar 2008 04:52:57 -0400

The world’s economy, including China, is currently taking a bit of a beating but skills shortages, hiring, staff turnover and salaries are still on the up in China. This is according to the latest Hudson report for 1st Quarter 2008.

The most reassuring element of the report says that only 4% of respondents expect their hiring plans to be affected by the current credit crunch. This result is in accordance with my own results which have been gained by continually asking hiring managers, HRMS and GMs if their hiring plans have been affected by the global slowdown.

So far no one has admitted to any effect but it’s worth noting that the Hudson Report was issued over a month ago. A lot has happened since.

The other elements of the Hudson report show a broadly upward trend as well. According to Gina McLellan, Hudson’s Hong Kong Country Manager, “Hiring expectations remain at a high level in all the markets surveyed and the outlook is positive. But employers are caught between sharply rising salaries and bonuses on one hand and high staff turnover rates on the other. This is most marked in China.”

Note the emphasis on China. This time last year 59% of companies in China were forecasting higher recruitment. That’s already a high figure but this year the result is 61%. The Hudson survey suggests a particular problem with a shortage of skills at the managerial level, and this has been an ongoing hiring challenge in China for many years. They cite evidence from sharply increased salaries for new managerial hires.

However, around one third of respondents are expecting pay increases, for new managerial staff, of over 20% and Hudson say this is much higher than in any other market surveyed in Asia. This seems an odd way to put it given that the average professional in China is looking at a salary increase of 20% just to accept a call from the headhunter. God must be in the details somewhere but I can’t see him(her).

The China bonus figures in the Hudson Report are also the highest in Asia. About 66% of companies are planning to pay discretionary bonuses of more than 10%.

This would be only sensible in a market where average performance bonuses are 2-3 month’s salary anyway. It is also worth noting that internal salary increases are about 9% per year in China, job change salary increases about 25%, and professional retention hovering around 18 months. Anything less than a 10% ‘discretionary’ bonus, which is a little undefined, is not going to keep you in the retention game in China.

Most of the focus of the report is on comparisons with other countries in the Asia Pacific region, and my guess is that this is because the China figures are so irritatingly consistent. There is no story in an average China salary increase of 9% when that has been the standard figure for many years.

Staff turnover gives us more of the same with rates in China higher than in any other market surveyed in Asia. However, they note that turnover rates are rising fast so we still have problems coming if the trend continues.

The money quote comes from Hudson’s Shanghai GM, Angie Egan.

“Employers are having to give both the highest salary increases and the largest bonuses in the markets surveyed in Asia but this strategy does not seem to be working, as they are also facing the highest staff turnover rates.”

China Labor Law Update

Frank Mulligan — Sat, 29 Dec 2007 08:23:01 -0400

In order to make a decision on any issue you need all the available information. The new China Labor Law has not actually come into effect yet but the data is coming in, and creating a picture of conflict and hope.

Feedback

The first piece of news, courtesy of CSR Asia, is that the Otis Elevator Company, has recently been accused of attempting to circumvent the new law. According to reports on Sina dot com Otis has allegedly requested employees to sign new contracts which cause them to forfeit benefits under the new law. It's not the only company to be cited for this but it is the only one that has been specifically targeted by Sina. A local company, Huawei, was also found to be doing this earlier on in 2007 but that issue seems to have generated much less interest.

The action by Otis is not necessarily the smartest thing to do when some of China's legal eagles are looking for carcasses to pick at. Or should I say visible targets with deep pockets that can be mined for gold. Compensation gold.

It reminds me of the old joke about the guy who gets hits by a car and tells his friend that 'Yeah, it's hurts, and compensation is setting in'. A culture of entitlement may not be upon us but the signs are that the times are a' changin'.

Meanwhile other elements in the legal profession are risking life and limb to ensure that the provisions of the law that protect workers are actually implemented. Stereotypes always run the risk of being shot down so kudos to the lawyers with the 'right attitude'.

Drawback

Rumors of a pullout by Taiwanese companies abound but much of this may be part of the usual bargaining that you see in any situation where some group is going to lose out. China's top legislators seem to be happy enough to force companies who do not comply with even the current laws to find another place to operate. They feel they have the choices, and in that respect they may just be right.

On the other hand, if these companies really are struggling at present, as they claim they are, the new law may be the straw that breaks the camel's back. A cut in employment is only a good thing if Foreign Direct Investment(FDI) continues to arrive, China's internal markets continue to expand, and the factories that are lost are just sweatshops. Replacing them with electronics and car assembly may cause a temporary loss of jobs but the longer term benefits are huge. Certainly worth the short term pain.

Having said this, however, we are not ready for the scenario where jobs are lost in large numbers. Even a less drastic scenario, where lazy workers are emboldened to hang on desperately to their positions, is not a tenable position for a country that must deliver continuous economic growth and development, or risk the consequences of a failure to satisfy rising expectations.

Pushback

Separately, the Dongguang labor bureau has issued a modified version of the national Labor Law. According to the China Herald, the differences are significant:

- Industrial action is equated to criminal behavior and can be reason for dismissal

- Workers must give a reason for leaving their job

- Any work done in dangerous situations is excluded as a condition to terminate labor contracts

The article concludes that we are likely to see more such modifications in the future, and that this is likely to muddy the waters. Not only do I agree, I would suggest that we may see a response from the central government as it tries to put a finger in this particular dyke.

With dissimilar results from the classic story.

ERE Expo in Amsterdam

Frank Mulligan — Thu, 22 Nov 2007 04:21:30 -0400

As of writing I have sufficient distance from the recent ERE Global Expo to get some perspective on everything that I absorbed.

As visitor from faraway China my interest was a bit mercenary so Microsoft China's presentation grabbed my attention immediately. I had a fair idea that I would get inside knowledge from a company that has a reputation for getting it right in China.

I wasn't disappointed.

The presenters were Danielle Monaghan, HR Director China for Microsoft, and Patrick Sullivan, Staffing Director for R&D, and they started off with a quick overview of Microsoft in China. Far more interesting though, was their understanding of the talent landscape in China.

As you might imagine, their main demand is for software engineering professionals, both individual contributors and managers, and they have two options: buy or build. The buy option includes interns, experienced domestic hires, campus recruitment and experienced international hires. Building is an important pillar in their talent acquisition strategy but it has to be balanced with the skills shortages in the China market.

The interesting part was that in order to get a handle on the supply/demand balance they basically use a competitive intelligence methodology and the data was illuminating.

According to research, China has about 1.8 million software developers, which is about 60% of the US market. The percentage of developers that are qualified for interview at Microsoft is about 1%, compared to 5% in the US. They are very-fussy-people, as you might expect.

This is clearly not good news for China but these figures will improve by 11% in the US and 16% in China, so the news for the future is a little better.

Unfortunately, this ties in well with the broader McKinsey study which estimates that only 10% of the university-educated engineering workforce in China with less than 7 years experience are suitable to work for multinational corporations. This is based on quality of education, English proficiency and cultural fit for the MNC.

(The flip side of this is that it is important to note that immigration issue and economic opportunities are tending to lure developers back to China, where investments by multinationals are growing. So the solution to the problem is already engaged.)

Microsoft sees itself as competing for talent with a very wide variety of companies and industries. The competitive intelligence piece here is very well developed and drills down to a detailed mapping of industries and companies. For some of their competitors they probably know more about their internal structure than those companies do themselves. Except of course for competitors who are performing exactly the same competitive intelligence exercises (we all know who they are).

But the bar has been set, and set high.

Graduate Recuitment

On the graduate side, Microsoft is also busy, but not with all and every university in China. They find that the blunderbuss approach doesn't work very well so they have a well-defined group of universities that they work with more intensively.

They use quite a funky approach to recruitment advertising and seem to be well ahead in this area. They are open about the fact that in the past they tended to assume that everyone would want to work for them, so they have worked hard to change the perceptions that people hold about them.

It seems odd to say but the situation is that Microsoft were in the past a relatively unknown or confusing employment entity in China. This is a normal problem in China but it is more commonly associated with mid-sized players or industrial companies that have no retail brand.

End Game

The focus that Microsoft has on talent management tends to align all the stakeholders in the process, to their mind. They are known for having very robust methods in their hiring process and an interview with Microsoft in China is likely to take an entire day. Everyone gets a say in the hire and conflicts are managed with well thought out rules and regulations.

From their point of view, this process ensures their internal businesses are able to forecast more accurately, can have intelligent conversations with stakeholders, and recruiting can staff up and commit to a hiring target. They feel they can create a better onboarding experience for employees and execute better on key people development.

So we can say that they have taken the talent management approach to its logical conclusion and have a clearly defined Candidate Value Proposition(CVP). This is based on matching up the desired attibutes for an employer in China with what Microsoft actually deliver on the job.

Their turnover rate, at 6%, is the end result, and in China this is nothing less than phenomenal.

(Note: I don't work with Microsoft in China, and have no vested interest in their success, but I can confirm the processes and procedures that they describe. I should also note I was a presenter ERE Global in Amsterdam.)

China's Labor Law - A Measured Measure?

Frank Mulligan — Tue, 11 Sep 2007 10:57:55 -0400

Acres of print, and a ton of trees, have been used up in the past year on the subject of the new China Labor Law. It goes into effect on January 1st 2008.

As is common with Chinese laws, there is often enough space between the lines of the text to drive a coach and four horses through them, never mind the issue of actual enforcement. But you can definitively say that there is a tightening of rules and regulations, and a shift in power towards the employee.

The welcome news is that the target of this increased oversight is not likely to be international companies, who tend to employ a great deal of self-restraint on the issue of workers rights. The real target is local PRC companies that are still highly challenged in dealing with a legalistic environment about which they have only a rudimentary understanding. However, international companies may get hit by the flak. They have a tendency to be in the way when a target is needed.

The various elements of the law have been done to death but perhaps one way of approaching the new law would be to compare what we had with the old law, written in 1995, and what we have now. Then we can get a sense of how far the new law takes us.

Labour Contracts

The old law, commonly referred to as the PRC Employment Law (PEL) contract required employers and employees to enter into a written employment contract. This is very much different from the U.S. employment scene, where "at will" relationships between worker and employer are the norm. After that the PEL said little except that an oral contract was also enforceable. This left a lot of wiggle room for negotiation, or conflict, depending on how you see these things.

Overall, and this is only a personal opinion, the new PRC labor law is not a great threat but companies will have to document everything in more detail, specifically issues like Job Offers, Labor Contracts, NDAs, reasons for termination etc. This will be necessary to protect against possible actions, either by failed job applicants, terminated staff or by union officials. The possible range of actions by the latter is still not clear, given the undefined character of their role in protecting the rights of employees.

The new law introduces four basic ideas or principles to guide the signing of labor contracts.

Firstly, the conclusion of employment contracts should comply with the principles of lawfulness, fairness, equality, free will, negotiated consensus and good faith. This may seem like a typical motherhood statement but lawyers would tend to see this as a series of negotiating tools to play with. Watch out for the small print.

Negotiated consensus implies to me that any sense of coercion would contravene the law. Good faith implies a full sharing of information on both sides. Given the presumed disparity in power between professionals and companies, this could have implications for issues like how much information your company provides to job candidates, especially when third parties are involved.

Secondly, there is a requirement for a written labor contract in any employment relationship and the commencement date of an employment relationship commences on the onboarding day ie. first day actually on the job. This, and other clauses, appear to tackle the problem of 'continuous casual employment' in China, and it will be welcomed all across China by employees of all persuasions.

Thirdly, if an employment relationship has already been established, but a written labor contract has not yet been executed, then a labor contract must be executed within one month of the employee’s first day on the job. This clarifies things nicely and avoids the current situation of where employees find themselves actually doing the job but still without a labour contract. The number of 'quick exits' should drop significantly and we get a lot of those in China.

Lastly, the onus is on the employer to make sure that the contract confirms with the new law. The PEL said little, if anything, about this. If the employment contract is found to be invalid and the worker has already performed labor, the employer is going to have to pay the worker labor compensation.

Labour Contract Term

The PEL said that if an employee has worked for the same employer for more than ten years and both parties want to continue the relationship, the employee has the right to determine whether the contract should be for a fixed term or not.

Ten years is a very long time.

The new law also uses the ten year wording but it clearly defines fixed-term contracts and open-ended contracts. Under the new law a fixed-term contract is to be converted to an open-ended contract if the employee has been with the company ten years, but there is an additional clause that could bring the change in a much shorter time. It says:

'the renewal occurs following the conclusion of a fixed-term employment contract on two consecutive occasions.'

The implication that many people I talk to are taking from this is that the employee may suddenly move from a fixed contract to an open-ended relationship with their company ie. not firable without compensation, after only two 2-year terms, one of which may already be over. As with all legal issues it is best to consult a good employment lawyer but just in this clause alone I get the sense of an increased willingness to enforce provisions that protect workers' rights.

Termination

Under the PEL an employer could terminate an employee on 30 days notice, if the employee was not able to carry out the work which he had been contracted to perform. The proviso was that all treatment to remedy the illness or injury had been completed. In practice this meant two written warnings and then a final termination notice, and you're covered.

The new law is clearer and specifically prevents an employer from terminating an employment contract during the probation period. To comply with the new provisions you must provide specific evidence that show the employee has failed to meet the conditions for employment. In addition, if the employee is to be fired the union must be informed of the firing in advance of the event. If they feel that the firing is unjustified they are entitled to request that it be reversed, and they must receive a response in return from the company. (Insert coach and four horses here....)

Other New Provisions

Probation - The old law says that probation periods are limited by the length of the employment contract, not the job function. The new law says the probation period must be based upon the type of work. Specifically, probation periods will be no more than one month for workers in non-technical positions; no more than two months for employees with technical positions; and no more than six months for senior professional positions.

Non-Compete - Under the new law the issue of non-compete clauses is clarified. Such restrictions can only be applied to senior management, senior technical personnel and those bound to keep confidential information of the employer. The maximum term of a non-competition clause is two years, down from three years.

Training Bonds - Repayment amounts payable to the the company for training cannot exceed the training costs. These amounts must be pro-rated over the agreed period of service after the training has been completed.

Unionization - The new law says that a labor union will assist and guide workers in the conclusion of employment contracts with their employer, and the performance thereof. This does not imply the creation of independent labor unions and it remains undefined to my mind. Again, this is purely an opinion, but if you operate a sweatshop and do not comply with the current labour law then watch out. Otherwise it should be business as usual. China is a boat that does not liked to be rocked.

Policy Manuals - Unless agreed by the labour union, company policies and internal rules are not binding. No mention of this in the old law.

Mass Layoffs - Under the draft law, employers are required to negotiate an agreement with the labor union over any mass layoffs, which are defined as the need to lay off more than fifty workers. Under the draft law, a "change of objective circumstances" test is required of companies to determine the need for mass lay-offs. What this change necessitates is a little grey but fear not, mass layoffs are not the issue in China. Finding staff is.

Conclusions

Overall, I think we will see an increase in labour costs, simply because we have been seeing an increase in labor costs for many years now. This could be construed as a very bad thing if China were competing as a low cost country, and it hadn't been happening already.

China still has a low-cost advantage in labor for some sectors but mostly it has moved away from screwdriver jobs, or at least is trying really hard to achieve this. The government sees China as having a reasonable advantages in wages but strong advantages in terms of having a large local market, developed infrastructure, well-educated employees, political stability and so on.

Balancing the employer-employee relationship in favor of the employee has a cost but the bulk of the advantages that China bring to the table remain, so on balance the measure is measured, and there is still another year to go before it actually kicks in.

As with any other issue in China, the key will be enforcement, not the words on the paper.

Graphs, Graphs, & More Graphs

Frank Mulligan — Sat, 21 Jul 2007 04:07:25 -0400

It is a little out of date now but the Xmei Conference offered up a treasure trove of thoughts and analysis on hiring issues in China. One of those treasures was the sheer number of useful graphs.

If a picture could tell a thousand words, this is what it would say:

Turnover rates in China are consistent with a War for Talent, across all industries and all functions. Peak rates, for those companies that take their eye of the retention ball, are much higher. Anecdotal reports of 80% turnover rates can be confirmed by HR practitioners on the ground. However, there are some signs that things might ease off next year.

The high rates in sales are also consistent with high expected salary increases in excess of 50% per annum. Other positions, such as Chemist or Engineer are normally in the 25%-30% range.

Onboarding rates are disappointingly low. Fesco's figures above, courtesy of Jim Yang of ChinaHR, show how things are getting worse. This illustrates the issue well but underneath there are other issues that rankle.

The hardest to accept is the sheer number of people who get 'lost' on the way to the office. Between the time that a Chinese professional accepts a Job Offer, and their expected date of onboarding, there exists a time that in China is known as The Dead Zone. Many, many job candidates accept Job Offers but then do not turn up, and without explanation.

Sendouts ratios are also a challenge to the point where the normal Executive Search model of presenting '4-6 candidates in 4 weeks' has been supplanted by a model where candidates are presented as soon as they are identified and screened.. The hiring company is then pushed to interview them as fast as possible. Before they find another job ie. tomorrow morning.

The retention problem is likely to continue if foreign companies invest in China at the rate they have in the past. Like all issues economic in China, the figures for investment have been exponential for more than 10 years.

The recent slowdown above is only a slowdown in the rate of growth. Newly opened up industries, like banking, are currently ramping up fast and skills shortages are emerging there already.

Salary is the major motivating factor for younger professionals to change jobs (see above). With the expected 30% bump in salary that can be achieved by moving this may be masking an underlying desire for better prospects and career development. We would only hope.

The logic of this is that if the person in the cubicle next to you has a salary that is 70% higher than yours, simply because they changed jobs twice in the last 3 years, then the necessity of your changing jobs may simply to achieve parity. So your changing jobs is a hygiene factor. The new job will not necessarily motivate unless it has the true motivating factor, which may be different for every professional in China.

Sincere thanks to all the presenters at the conference for their systematic thinking and analysis. There were many other insights on show but they were not presented as graphs or images.

Credit where credit is due: the graph sources were Hewitt, Hudson, Fesco and ChinaHR.

Employer Branding

Frank Mulligan — Tue, 03 Jul 2007 04:29:15 -0400

Robert Half, the big international recruitment company, just issued an interesting global study on The Rise of the Employer Brand. It makes for interesting reading, even if China was not included in the mix.

The study is a summary of interviews with, strangely enough, 2,200 finance managers across 17 countries in Asia Pacific, Europe and America. Why they didn�t interview HR people is a good question but part of the reason must be that Robert Half is very focused on the finance area. Their specialization is a big advantage in terms of their client offering but they have to work with what they�ve got.

The study, which you can order here, looks at the connection between employer branding and the skills shortage, and clearly is intended to inform companies of the value of a strong hiring brand. Specifically, this would mean how to attract and retain good people.

My main take-away is their suggestion that recruitment can, and should, be seen as an extension of marketing. It seems like an obvious thing to say but it is still amazing how many companies in China have no conception of what this means.

It doesn�t mean advertising of the kind that tells everyone how great the company is. Rather, it is about talking the talk, and walking the walk; and integrating the view of the organisation that is projected into the hiring market with the reality on the shopfloor, or in the office.

If the branding is done in this way your employees will become evangelists for your company and the positive feedback loop that is created will continue indefinitely. Or at least until there is a mismatch between what you say about your company to job applicants, and what is actually true.

If you are lacking in time, and we all are in China, here is a summary of Robert Half�s conclusions about how to develop a strong hiring brand:

Action Plan

1. Research your company�s current attraction and retention performance:

� Ascertain for which departments or job titles you have problems hiring

� Assess whether your current employees represent the calibre of employees you would like to hire in the future

� Ensure the right people at your organisation are conducting candidate interviews; do they

represent the image you would like to convey?

� If you make a job offer and its declined, find out why the candidate wasn�t interested in working for you

� Conduct exit interviews to establish why people are leaving

2. Conduct an audit on your company�s values and points of difference:

� List the reasons why someone may opt for employment with your organisation

� It may be worthwhile to conduct a survey and / or a focus group with internal and external

stakeholders to compare your stated company values with the reality of internally and

externally held perceptions and opinions about your organisation. Consistency between

brand reality and the image you sell are critical for success

� Ensure current employees are aware of what the organisation represents in terms of culture and values

� Measure the consistency of your employer brand across all channels

3. Initiate your roll out plan:

� Establish an �Employer Brand Team� which includes at least one C-level executive

� Ensure the values and attributes are conveyed in your hiring channels such as advertising, company websites and public relations programmes

� Review the messaging on a quarterly basis to ensure your organisation continues to adhere to the guidelines you have established

� Conduct an annual �brand health-check� to measure the perceptions of your internal and

external stakeholders

Note: If you actually do order the report please enter your address in full. It will not be sent to you by email as a PDF but by snail mail. You have to ask why anyone would wait more than a few hours in this day and age.

China Salary Report Summary

Frank Mulligan — Tue, 12 Jun 2007 21:41:32 -0400

As of writing, the hiring process in China is slowing a little as expatriate managers from multinational companies begin to take their summer holidays. With many decision makers out of town the slowdown will continue until September, when school starts.

Many of the positions that arose after the Chinese New Year bonuses were paid, around March, have been fulfilled, and potential candidates have turned into new employees. They have settled into the swing of things in their current company. Those who did not make a move are thinking less and less about changing jobs.

It?s getting too hot to think about anything else except the summer holidays so this is a good time to review the hiring and retention studies for the last 6 months or so. Most of them complement each other and suggest an ongoing challenge for hiring, well into the future.

This is what the big boys are saying:

The Hudson Quarterly Report told us in the first quarter of 2007 that employment expectation had risen, after falling for four consecutive quarters. Of particular interest, or concern, was the banking sector, which was opened up significantly in November 2006. Hudson cited it as the hottest hiring market in China, with 77% of respondents saying they will increase hiring.
Watson Wyatt say Chinese workers are much less satisfied with their pay and benefit packages than workers in the rest of Asia Pacific. They studied 180 companies and 60,000 employees in China, and less than 30% of respondents feel their compensation and benefits are to their satisfaction. This compare unfavourably with 38% in AsiaPac and 47% in the US.
Korn/Ferry reported in March on recruitment and retention within the life science market in China. Their conclusion was that ?the single largest brake on the growth of the life sciences sector in China is the struggle to attract, and even more importantly, retain an executive workforce that possesses the right skill sets?.
The Hay Group told us in March 2007 that China tops the rankings for forecasts of real base salary increases in a wide variety of positions. They predict 7.9% increase for administrative workers, 7.8% for professionals and 8.9% for senior management. This compares with an average increase of 1.4% in the US this year.
In April, Rohit Talwar and David Smith of the Global Futures & Foresight summarised what 600 respondents felt about China, and about how it is expected to develop. This development will clearly feed into hiring, and has done already.
In March, no less than the Conference Board told us that the new crop of China graduates often lack the practical experiences and softer creative and leadership skills required in the business world. Based on their research they conclude that one source of the problem is China?s educational system, which relies too heavily on memorization.

Doesn?t make for happy reading, does it? (Download reports here)

XMEI China Conference (Summary)

Frank Mulligan — Mon, 28 May 2007 08:35:41 -0400

The notion of the Make China Your Gold Mountain Conference was always interesting.

Take on-the-ground HR practitioners in China and bring them to the US for a conference. Then ask American HR practitioners with an interest in China to attend the conference in San Francisco. Add in strong implementation from XMEI founders Xiaoli Mei and Liz Menkes, excellent support for visiting speakers and Hey Presto!, you have a success on your hands.

As of writing I am watching Dr. Irv Beiman supply the details how the strategy process in China works, and how you can use the Balanced Scorecard to effectively implement that process.

Dr. Beiman works largely with local Chinese companies and that’s the surprise for me. It’s not mulitnational companies (MNCs) that are adopting the Balanced Scorecard, unless it has been driven by the corporate HQ back in the home country.

According to Dr. Beiman, this can be attributed to the fact that local Chinese conglomerates have little in the way of legacy systems to hold them back. MNCs meanwhile have to abandon their existing systems to take on the new ones. This is something that many are not willing to do so the final winners in the strategy game may not be the expected ones.

Todd Raphael has already posted on the subject of Rednecks & Turtles so I don’t want to repeat this here. It doesn’t sound very Politically Correct (PC) but that’s another limitation that we don’t suffer from in China. No legacy of PC here.

Also speaking was Roberto Siu, the HR Director of DSM in China. His focus was on the subject of Compensation & Benefit trends in China, a subject that continues to worry us all here. Roberto took a lot of his analysis from the Hay Group and Hewitt Associates.

The signs are not good as the long term trends are of increasing salary in China, proportionate to other countries, and an implied reduction in competitiveness. Pay is also increasing disproportionately for middle and senior management.

These results sound right for a country that is growing fast and experiencing skills shortages but according to Roberto the results are unexpected. Normally, he says, countries experience a moderation in salaries as the market matures.

China as the exception, again.

China's Hiring Culture

Frank Mulligan — Wed, 18 Apr 2007 00:07:30 -0400

Could this be ERE's first Wiki?

The trigger was an excellent question posed to me by a lovely lady called Sherry Karr, who is a member of the China Talent group. Her question boils down to the difference between the cultures in the Western World and China, and how this affects hiring.

Rather than setting out a definitive document, which I am not capable of producing alone, I would suggest that the members of Talent in China should be able to build this document. This is user-generated-content. ERE's first Wiki ....

I will start with a single issue, Behavioural Interviewing (below) and others can add their thoughts one issue at a time here. Then I will add those posts to this document in some sort of logical order. Over time we will get some sort of final document.

Full credit will of course be given to each paragraph from each China Talent member with a link back to their profile on ERE. (When you post on the Talent in China group please try to follow the simple format below. Heading plus paragraph plus solution plus . I will find your profile and put it in as a link. Tks.)

Behavioral Interviewing

The basis of Behavioural Interviews, or Competency Interviews, is that past behavior is the best way to determine future performance. This is ok in so far as it goes but the culture of the person on the other side of the desk is a big factor.

The weakness of this kind of interview is that, like all interviews, it can be practiced. In China few people have had a chance to practice and care must be taken to ensure that they get a good shot at doing well.

Additionally, people from individualist cultures do well in behavioral interviews while people from more communitarian cultures simply don't because their sense of self is wrapped up in other people.

So if you ask someone from the US to describe a situation where he had difficulty communicating with someone he is likely to be able to give you half a dozen solid examples.

The reaction in China is often, 'Difficulties communicating, no, no, I don't have difficulties communicating. I'm in sales and we are good at communicating .....' As you can see the issue of 'face' comes in here as well.

Recommendations

What all this means is that the pre-interview 'Spiel' that is normally given to introduce Behavioral Interviewing must be longer than usual in China.

To take it further, it has to be explained that not only should the candidate give real examples of real situations but also that he will not be penalized for describing situations that did not work out as planned.

Lastly, candidates should be given the chance to have a practice question and that question should be structured to show the candidate that in fact we all have 'problems with communicating' or 'difficulties in planning'. It has to be made clear that this is perfectly normal and nothing to be ashamed of.

If the interviewer gives a specific, personal example this should have the highest impact.

Frank Mulligan>

Hiring Direct Labor in China

For workforce on production floor, the turn over is extremely high. Different from companies in the west, the average age of is very young (average 20 years). For manufacturing companies here in China, there is usually fully-occupied staffs deal with the hiring of DL. The hiring cost and training cost are pretty high because of the high turn over rate. Especially in first-frontier cities in China.

Reasons:

1. For DL, the no.1 factor to make the decision of changing a job or not is money, even RMB50 can make a big difference;

2. In China, usually factories are built in a certain area like industrial area/park. It’s easy for them to “shop” jobs;

3. Usually the main labor force of DL are from country-side/poor areas. They never think they will be part of the cities (fast-pace, high cost of living, the way they are treated…) So basically they do not even think in terms of “long-term development”;

4. Their age if one reason as well. For many companies, they prefer to hire young workers. The fact is, for a young guy it is easier to change a job than a mature person who has family to support;

Solutions:

To try to work with vocational school and build long-tern relationship with them; To widen the labor source to middle aged, responsible persons; To keep the working environment harmonious;

Cheryl Deng>

Hiring Good Chinese Salesmen

Salesmen generally fall into two broad categories: customer service oriented “order takers” and value adding “problem solvers”. Most multinationals seeking outside sales professionals are looking for value-adders – who are under-represented in typical China-based companies.

Traditional Chinese salesmen tend to spend all their energy building connections, with only the vaguest notion of how these relationships will ultimately result in a transaction. The problem facing Chinese salesmen (and their international managers) is that traditional Chinese buyers don’t look at salesmen as a business resource, or recognize their expertise. Chinese salesmen tend to wait for their prospects to initiate the transaction – and merely negotiate discount levels. While this approach may work just fine in a retail environment or when selling to bureaucratic government agencies, it is wholly inappropriate for an international B2B operation.

Attempts to transform a Chinese order-taker into a proactive, independent value-adder are generally unsuccessful. I’ve seen western sales managers and MDs try training, coaching, bribing and threatening – all to no avail. The problem can usually be traced to the hiring methodology. Chinese managers hire team-oriented, relationship building sales people because that’s the kind of person they are most comfortable working with. It’s ironic that aggressive, money-oriented types are just as plentiful in China as in western countries – but the established HR decision-making hierarchy tends to avoid them because they disrupt the harmony of the workplace.

Solution:

1) Build a profile of your target salesmen based on the kinds of behaviors you want to hire. You don’t want someone who will work hard and fit in with a group – you want someone who can be persuasive and is motivated by selling. The best salesmen are independent and goal-oriented. They like being right and getting their own way. These are the behaviors you should be seeking out.

2) Compensate these individuals as individuals – not as anonymous cogs in a larger machine. Good salesmen are motivated by individual achievement and monetary gain. They react to commission and individual incentives. Make that part of the interview conversation. Sales is one area where a little selfishness and greed are healthy. The best salesmen are in it for the money – and they want people to know it.

3) Look beyond the respectable, top-school, corporate mold. In China, your best salesmen are probably coming from the less developed provinces, and may not have graduated from famous schools. That’s ok. These are the people who are really driving China’s economic growth. Don’t worry if they are a little rough around the edges. An aggressive salesman can be trained to present well and wear a nice suit. A meek bureaucrat can never be taught to fight for an order or close a tough sale.

Andrew Hupert>

China's Place in the World

Frank Mulligan — Mon, 02 Apr 2007 22:00:06 -0400

A major report entitled ?The Future of China?s Economy, The Path to 2020 ?   Opportunities, Challenges and Uncertainties? just prompted me to ask the members of the Talent in China group the obvious question:

      How do you see China developing, and what is the
      impact on hiring?

Based on a poll of 700 executives from more than 60 countries around the world, the report tries to guage their views and expectations of China?s global impact to 2020.

The poll is interesting not just for the results but also for the fact that it was even commissioned in the first place. With all due respect to the relevant countries, no one is posing any questions about the impact of Cuba or the Tahiti on the global economy.

The authors are Rohit Talwar and David Smith, and if you want a copy you can contact them directly at the addresses/numbers below.

Rohit Talwar rohit.talwar@thegff.com +44 (0)7973 405145

David Smith david.smith@thegff.com +44 (0)7932 408901

The Table of Contents can be downloaded here. In the meantime, here is a summary of what respondents believe is true about China:

� 30% believe China?s Economy will overtake that of the USA by 2025 and 73% believe it will happen by 2035.

� 89% of respondents think international companies will consider it essential to be listed on a Chinese stock market.

� 78% believe that the Chinese stock market will overtake the New York Stock Exchange in size.

� 60% believe Chinese companies could become the largest grouping amongst the Fortune Global 500 by 2040.

� 45% of respondents think Chinese culture and business practices will enter western corporate life.

� 48% believe key industry and market decisions will be taken in China

� 70% of respondents believe it will be considered normal for US and European workers to be employed by Chinese owned companies by 2030

� 65% of respondents claim to have had no direct Chinese business experience.

� 65% of respondents receive no revenues or profits from China.

� 55% of respondents expect China to increasingly become the launch market for new products and services,

� 43% of Indian respondents were already generating revenues from the Chinese Market, compared to only 25% from North America and 34% from Europe.

� By 2020, 25% of Indian respondents expect to earn over 40% of profits from China, compared to just 8% of Europeans and only 12% of North Americans.

So what do you think?

China's Talent Gap (II)

Frank Mulligan — Sun, 01 Apr 2007 22:52:59 -0400

Personally, I am always looking at problems and seeking their resolution, and like many people, when I don't have an actual problem to hand I tend to look for another one, and solve that instead!.

But ultimately I prefer solutions.

In my very first post on this blog I tacked the Talent Gap in China. My question was whether China is creating the kind of educational system it needs to drive its economy. Yet another problem, right?

I got a number of interesting perspectives on this question in the responses in the China Talent group, and even managed to get a copy of the Conference Board report that prompted the question in the first place. (Email me if you want a copy.)

A recent New York Times article may have a few hints as to how the issue of the Chinese educational system may evolve, and how it might actually be 'solved'. The solution appears very relevant to the US.

The article concerns a girl call Meijie, who came to prominence a few years ago in China because she got into Harvard. She followed on from another girl who was so famous in China she was just known as 'Harvard Girl'.

Like Harvard Girl Meijie got there on merit, which in China means she studied hard, remembered all the facts and regurgitated them at exam time. However, when she arrived on campus it seems she didn't have that typical retentive attitude embedded in her genes.

Meijie actually wants to change the world. At least the educational system anyway.

Her feeling is that the US educational system offers a lot that the Chinese system does not. So while American educators take steps in the direction of the Chinese system, she is pushing for China to go in the opposite direction.

Sections of the Chinese government agree with her and, as a result, here on the ground in China there is a definite sense that the system is relaxing a little. It has even filtered down to the primary and high schools where my kids are. They are happy with the new policy because it means less homework. (Note that for kids in China this means reducing from 3 hours to 2 and 1/2 hours a day.)

The new focus for educators in China is on the character of the student, as opposed to the rote memorization of facts. The system is being redesigned, albeit slowly, to identify the potential of the student and help them to realize their goals. This is very new, and from the outside the signifance of it is easily masked by the fact that so many of the changes are obvious and simple. If it manages to squeak through the labyrinth of the Chinese public administration system, it will have profound effects.

So companies in China may eventually be able to get the kind of employees they are looking for.

Just not tomorrow.

Powerpoint Giveaway

Frank Mulligan — Thu, 29 Mar 2007 03:00:56 -0400

In my last post I gave a rough overview of a new talent conference that just hit the scene.

The Australasian Talent Conference was held in Sydney last week and proved to be a big success. It was difficult to summarize because so much happened, and we are obviously going to see more. I can only hope I did it justice.

Gerry Crispin agreed that there was deep content and an unmatched networking opportunity. (I am still getting used to 'names' like this mentioning my name in their posts so I won't bring it up again ... pause ... hmmm.)

Even David Manaster was of the opinion that this was a great idea well executed. Praise indeed from someone who should know.

But you don't have to miss out. I promised a link to the Powerpoint slides and here they are: