China’s Evolving Talent Dynamics – What you Need to Know
Following the celebrations that started in early February amongst the global Chinese community, the world has officially entered the year of Monkey. Offices were closed for a week when some people travelled all over China to visit families, and others went elsewhere to enjoy the ‘golden week’. Upon return, they were fully recharged to kick start a new year full of aspirations – both for individual career development and for business growth.
What role will China play in our global business portfolio? What kind of growth can we expect from the market in China? These are the questions that leaders in global headquarters everywhere are asking themselves, as are the China leaders. Of course, to answer these questions and to determine the right strategies to achieve business goals, it is necessary to understand the new dynamics of China – not in terms of economics, but also in terms of talent.
What are some of the new talent dynamics in today’s China market? What should global headquarters know about the new challenges with regard to China’s talent agenda? What advice can and should be given to the global talent leaders handling China? We approached a number of HR leaders in China with these questions, and what follows is a summary of what this group had to say on the subject of China’s talent dynamics today.
The Basic Understanding
China is a huge market for many businesses, and it is also a very complicated one with different talent dynamics and landscapes in the various parts or ‘tiers’ of the country. Top talent is centralised in tier one cities such as Shanghai and Beijing, where many have overseas educational backgrounds, possess the most advanced skill sets, and have excellent communications skills in both English and Mandarin. As a result, this group demands the highest salaries - in some cases, even higher than their counterparts in more developed countries. In 2nd and 3rd tier cities, employers can find a lower-cost workforce, but their capabilities, experience and English language skills cannot compete with those in tier one cities. For these reasons most multinational companies locate their China head offices or regional offices in tier one cities, so although there is more high calibre talent in these cities, the competition for good people is still very tight.
The talent market in China is much more competitive and complex than many global leaders realise. Over the past few years, multinational companies (MNCs) have been losing talent to local Chinese organisations, including those that are state-owned, private, and even local start-ups. As Xiao Qi, HR Director, Talent Acquisition, at Bristol-Myers Squibb mentioned, “It has become a misconception by the global people that young people in China prefer to work for MNCs.” According to Charlie Li, Senior HR Director at EMC China, “Instead, Chinese local IT companies have become strong competitors for talent with their unique approach and talent strategies, including competitive compensation.” MNCs that operate in specialty areas face even tougher challenges, as often their brand names are not as well-known to consumers or to the public. In contrast some local players, for example the likes of BAT (Baidu, Alibaba, Tencent), are considered much stronger employer brands for the younger generation.
Getting to Grips With the Motivations
There is a Chinese proverb – ‘Human beings die in pursuit of wealth, and birds die in pursuit of food.’ Changing jobs for higher compensation is nothing new, and to some extent is simply human nature. In a talent shortage market, there are always organisations that are willing to pay a higher price for the right person.These days, however, there are limits given the already inflated base salary levels in China, so local companies usually have much more aggressive bonus plans to top up their compensation packages. In addition, many local startups are now offering the potentially unlimited value of pre-IPO shares, and this has formed a significantly more attractive component of the total package.
However, as Maslow’s Hierarchy rightly pointed out, money can only meet the foundation level of needs, whereas the higher level motivation comes from career aspirations. China’s young talent expects a fast career track, and in general they do care about titles – something deeply ingrained in a culture that values hierarchies and rankings. In addition, many multinational companies require employees to be mobile in order to have an accelerated career; however, many local Chinese are not very mobile either domestically or internationally. This is once again related to cultural and social aspects around aging parents, schooling options for kids, and balanced development for double-income couples. As Alyssa Wang, Regional HR Business Partner at DuPont, pointed out, “Sometimes it is difficult for our global headquarters to understand why it is so difficult for Chinese talent to relocate even within China, let alone outside of the country.” With these limitations, individuals must often choose to move companies in order to accelerate their career progression. In many cases, Chinese companies have proven to be more open-minded in allowing talent to move across industries or functions, thus providing a more exciting career path without the need to change location.
The Advantages of the MNC
In spite of these limitations, multinational companies still have some unique advantages, and should ensure that these are leveraged to attract the best talent. “Chinese young talent has very strong desires and needs for training and development,” commented Gary Qin, Director of Talent Acquisition at SAP China. ”So we should not cut training and development budgets especially in the difficult times, as that can become an important retention factor for young talent.” MNCs are still considered the best ‘on the job business schools’ for exposure to best practices and cutting edge management concepts.
Broader regional or global experience still appeals to many young workers. More open-minded MNCs have allowed regional or even global roles to be located in China, rather than limiting the location to the global headquarters or regional hubs. These forward-thinking organisations have been winning over top Chinese talent and enjoying retention for a longer period of time. Conversely, for those who are mobile, there are opportunities to move out of China to regional and global headquarters, which has made a significant contribution to the development of truly international Chinese talent.
One Final Piece of Advice
In today’s China, change is probably the only thing that doesn’t change. When asked for the single most important piece of advice they would like to give their global headquarters, several HR leaders we interviewed echoed Michael Fan, HR Director for Asia Pacific Marketing, Sales & Services at Volvo Car Group, “Come and visit China more often, see it, hear it, and experience it yourself.” This seems so simple and straightforward, but is often overlooked. “The whole idea is to fully understand China before making a judgement or decision,” Sunny Sun, HR Director at Ingram Micro China, commented, “so those global leaders who make the effort to visit, understand, and over-communicate with China are widely respected.” Global HR leaders should not assume that their experience in other countries, or in China a few years ago, still hold true in the constantly evolving China of today.