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Fresh Perspectives
Winning in China:Building Talent Competitiveness
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2 Winning In China: Building Talent Competitiveness
Manpower Inc. (NYSE:MAN), ranked number 143 on the Fortune 500 list,
provides innovative workorce solutions to organizations o all sizes via its
network o 4,000 oces in 82 countries and territories. For more inormation
visit www.manpower.com.
ArticleIn Th is Chinas talent landscape is changing; Chinese companies are gradually
gaining traction on the international stage and oreign companies are
losing their appeal or Chinese workers, who now preer to work or
Chinese private-owned companies.*
Foreign companies operating in China will ace greater challengesnding the talent they need and will nd it particularly dicult to retain
talent at the manager level where shortages are most severe. They nolonger have a reputation as the highest-paying and best employers.
HR management in oreign companies are already eeling the eects ocompetition rom Chinese private-owned companies as they struggle
to attract talent, yet surprisingly ew are responding to the challenge.
Competition or talent can only intensiy as Chinese private-owned companies are ambitious about initial public oerings and
internationalization and more oreign companies increase their ocus
on the Chinese market.
In response to the escalating war or talent, oreign companiesmust leverage HR as a strategic partner in order to ensure therecruitment and retention o top talent over local private-owned
companies. They must also oer competitive salaries and
benets, prioritize the development o uture managers and
localize their talent strategies to the Chinese market.
Chinese private-owned companies still ace serious challenges inmodernizing their internal management systems. They still must invest
intensively in their human capital in order to compete eectively with
oreign companies or talent.
* Reers to companies not owned by the State.
More articles like this can be ound in Manpowers Research Center
atwww.manpower.com/researchcenter
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Fresh Perspectives 3
IntroductionFor over three decades, oreign companies have
fourished in China. Many Fortune 500 companies
now have operations in the country, including:
General Electric, AT&T, General Motors, Microsot
and Pepsi Cola. In April 2010, oreign direct
investment surged 24.7 percent year-on-year to
over $7 billion, according to the Chinese Ministry
o Commerce.1
With a reputation as golden brands, oreign
companies have long been regarded by Chinese
workers as highly desirable places to work.
However, all that is starting to change. In the
wake o the recent nancial crisis, many oreign
companies have cut production and reduced their
payrolls; some have even shut down Chinese
operations. Recent unrest and industrial action
among workers also indicates a pool o disgruntled
workers who are seeking improved benets.2 It
seems that oreign companies are beginning to
lose their allure.
This comes at a bad time; Chinas working
population is aging and the number o Chinese
workers ages 15-19 will all dramatically ater 2011,
according to the United States Census Bureau.3
Maintaining their talent pipeline, particularly at the
manager level, is now a business critical issue or
oreign-owned companies.
Compounding the challenge or oreign
companies, more Chinese rms, both state-
owned and private-owned, are gaining prestige on
the international stage and are enjoying a better
reputation among workers. In this context, the
talent war between oreign and Chinese private-owned companies is beginning to turn in avor o
Chinese private-owned companies.
While this trend presents many opportunities
or Chinese private-owned companiesboth
domestically and overseasoreign organizations
will ace greater challenges in nding the talent
they need to help them achieve their
business objectives.
A shiting talentlandscapeManpowers2010 Foreign and Chinese Private-Owned
Companies Talent Competitiveness Surveyindicates that the
lure o oreign-owned companies is now waning or Chinese
employees, with more preerring instead to work or Chinese
private-owned businesses.4 The data reveals a clear change
in job seekers preerences; compared to the 2006 survey
results, the percentage o job seekers considering Chinese
private-owned companies as their rst choice is up by ve
percentage points, while those preerring oreign companies
is down by 10 percentage points (see Chart 1).5 Chinese
private-owned companies are especially avored by job
seekers rom South China where companies are relatively
more mature and generally have more modern management
systems. These companies, such as Anta, Vanke and
Hengan, are well respected in their industries and have
good reputations as employers.
Chart1:IndividualsEmployerPreferences
Chineseprivate-ownedcompanies
Whichtypeofcompanywouldbeyourrst
choicewhenyouconsideryournexttransition?
Foreigncompanies
up5%
down10%
Percentage o job seekersconsidering Chinese private-ownedcompanies as their frst choice is upby fve percent compared to 2006.
Percentage o job seekersconsidering oreign companiesas their frst choice is down by10 percent compared to 2006.
Source: Manpower China
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4 Winning In China: Building Talent Competitiveness
With talent shortages becoming more acute, and as ast-growing Chinese private-owned companies
become more competitive, oreign companies will nd it increasingly challenging to retain managers.
Manpowers survey indicates that this pressure will continue and even intensiy as Chinese private-
owned companies have become markedly more attractive to management-level job seekers.6 Sixty
percent o managers responding to the survey say that a Chinese private-owned company would now
be their rst choice as an employer.
Foreign companies ace urther competitive threats rom Chinese private-owned companies which
have been investing heavily in talent, oering highly avorable compensation and benets packages.
Consequently, oreign companies no longer have a reputation as the highest-paying employers.
Manpowers survey reveals that 43 percent o job seekers view better compensation as the primary
reason to avor Chinese private-owned companies, seven percentage points higher than or those who
are attracted to oreign companies (see Chart 2). However, when it comes to corporate culture, Chinese
private-owned companies still lag behind their oreign counterparts. Only 20 percent o job seekers
view experiencing a new corporate culture as the primary reason to choose Chinese private-ownedcompanies, compared to 28 percent among those preerring employment with oreign companies.
These shits in the balance o talent are already being elt among HR management o oreign
companies. Sixty percent say they eel the eects o competition rom Chinese private-owned
companies when it comes to their ability to attract talent and they say this impact is increasing,
particularly in Eastern China. However, surprisingly ew oreign companies are responding to the
challenge. The percentage o oreign companies who have taken countermeasures to improve their
talent attraction strategies is lower than, or almost the same as, that o Chinese private-owned
companies. The dierence is especially evident when it comes to making an investment to secure
talent, including increasing compensation and benets packages (a 10 percentage point gap) as well
as oering training incentives and learning opportunities (a 16 percentage point gap, see Chart 3).
Chart2:PrimaryDriversofCompanyPreference
Whataretheprimaryreasonsforchoosingthesecompanies?
Chineseprivate-ownedcompanies Foreigncompanies
Bettercompensation andbenets package
Better workcapabilities
Better trainingand learningopportunities
Facilitatinglong-term career
development
Experiencing newcorporate cultureand environment
Accommodatingbetter work/lie
balance
Source: Manpower China
43%
36%
37%
31%
28%
22%
59%
52%
48%
20%
16%
9%
As a global organization with operations in China, we are seeing the impact o this
shit in motivations o job seekers as some are becoming less loyal to the companies
they work or and more loyal to their purpose, said John Rice, President and CEO o
General Electric Technology Inrastructure. Thats why, at GE, we have intentionally
ostered a culture o continuous learning to increase the experience and exposure
were giving our employees and help develop their careers.
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Fresh Perspectives 5
So what does the uture hold or oreign and Chinese private-owned companies competing or talent?
As growth continues, Chinese companies are generally ambitious about initial public oerings (IPO) and
internationalization. On the other hand, at the global strategic level, more oreign companies are signicantly
increasing their ocus on the Chinese market. This means that competition between the two groups toattract and retain talent will only intensiy as they seek to increase their ootholds in the Chinese market.
Winning the Talent War:Advice or Foreign Companies
Maintain a exible compensation system: Whenoreign companies rst started operations in China, Chinese
employees were oered remuneration similar to those o oreignsta. Now, however, compensation and benets oered to
executives by some Chinese private-owned companies are even
more attractive than those oered by oreign companies. Their
equity incentive plans are particularly eective in luring executive
talent away rom oreign companies.
In addition, some oreign companies assume that since labor in
China is cheap, they can pay lower salaries to local executives.
As a result, some local executives are paid hal or even a third
o the salaries that oreign executives receive, even though the
latters perormances are not necessarily any better than that olocal executives. Such unair compensation distribution clearly
has a serious negative impact on local employees motivation to
work or oreign-owned companies.
Manpowers annual 2010 Talent Shortage Surveyshows
that skills shortages in China are most severe among senior
managers, so to win over scarce local talent, oreign companies
have to pay local senior managers at least as much as those
rom overseas.7 However, pay is rising across the board. In
act, rom 2002 to 2006 workers wages rose by more than
nine percent per year (in U.S. Dollars) nationwide, while wagesjumped by over 11 percent or those working in cities.8 In order
to maintain sustainable competitiveness, it is critical or oreign
companies to exercise fexible compensation systems which
adapt quickly to market changes. Moreover, the requency and
margin o pay adjustment should be based on the severity o the
shortages and demand or relevant talent in the market. Due to
the mismatch between supply and demand, it is not uncommon
or managers in some positions to receive an annual two-digit
percentage salary increase in order to retain them.9
Chart3:EmployerMeasurestoAttractandRetainTalent
Giventheincreasinglycompetitiveenvironment,whatmeasureswillyourcompanytaketoattractandretaintalent?(Youmayselectmorethanonechoice)
Chineseprivate-ownedcompanies
Increasing compensationand benets packages
Foreigncompanies
Oering better workopportunities
Oering more training andlearning opportunities
Providing career planningor employees
Improving employerbrand, shaping bettercorporate culture andenvironment
Adopting proessionalHR services
No measures available atpresent
72%
62%
39%
33%
67%
51%
47%
28%
47%
37%
22%
22%
8%
8%
Source: Manpower China
A Critical Battle or Talent
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6 Winning In China: Building Talent Competitiveness
Leverage unique training opportunities: From the perspective otalent retention and business costs, it is not a long-term solution to rely solely
on increasing compensation and benets packages; companies poaching
talent with attractive remuneration should be wary o nding themselves stuck
in a vicious cycle as other companies poach their talent with even higher
wages. Although money is a critical actor in talent attraction, particularly ormanagement roles, it is by no means the only actor: Chinese managers are
also attracted by training and development opportunities.
Many Chinese private-owned companies have started paying attention to talent
development as they experience ast growth; some are even developing their
own training schemes. To stay ahead o the game in terms o employee training
and development opportunities, oreign companies should continue to leverage
their unique advantages, or example, by oering high achievers the opportunity
to experience diverse cultures and cross-country training, regardless o their
position, educational background or seniority. Foreign companies should also
combine successor planning with leadership training and maintain a strongocus on employee development within the whole company.
Break the glass ceiling: Some oreign companies have started toassign local talent to senior executive positions in China. This trend should be
encouraged, especially or Japanese and Korean companies, but most oreign
companies still appoint expatriate managers. This has led to many talented
executives choosing to work or Chinese private-owned companies in recent
years because they reached the glass ceiling at oreign companiesthat is,
they could progress no urther. This trend is conrmed in Manpowers 2010
Foreign and Chinese Private-Owned Companies Talent Competitiveness
Survey, which reveals that 55 percent o management job seekers madethe decision to switch employers in order to benet rom long-term career
development. In ast-growing Chinese private-owned companies, mid-level and
senior-level managers are generously empowered and oered great promotion
potentialin some cases promotion is as requent as once a year or even once
a quarter.
Leverage HR as a strategic partner: HR departments o oreigncompanies must be leveraged as strategic partners in organizations business
development plans. For example, HR can add real value in securing the
talent needed or business expansion, as well as ormulating and improving
strategies or talent fow, attraction and retention across countries, citiesand regions. Finding talent to uel business expansion in particular can be
challenging or oreign companies targeting second- and third-tier cities or
even smaller markets in China. In addition to coping with high turnover o
managers in rst-tier cities, they have to attract and recruit a large number o
business development sta each year. However, cross-regional HR allocation
in China is not straightorward. First, it is challenging to move and retain talent
in emerging markets, which lag behind rst-tier cities in terms o education,
Many Chinese private-owned companies
have started paying
attention to talent
development as
they experience ast
growth; some are
even developing their
own training schemes.
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Fresh Perspectives 7
medical resources, service acilities and overall standard o living. Second,
Chinese private-owned companies, who are better at encircling cities
rom rural areas, transer their research and development and marketing
centers to rst and second-tier cities where talent is plentiul, such as Beijing,
Guangzhou, Shanghai, Xiamen and Shenzhen. This leads to increasingly
erce competition or management-level talent between oreign and Chinese
private-owned companies.
To gain an advantage in the current talent war, oreign companies should not
only regularly review their compensation incentive systems and employee
benets according to the local market, but HR departments must also
consider how best to develop high-potential employees rom the perspective
o a mid- and long-term business strategy.
Prioritize development o management talent: Due to thepronounced shortage o talent at the management level, oreign companies
need to pay particular attention to prioritizing the development o employees
at that level. As competition or talent escalates, oreign companies must behighly responsive to trends in the labor market and ensure that they do not
just become a training ground or individuals who then leave to grow their
careers with Chinese private-owned companies.
Today, when there is no perect candidate or a position, companies are
being rewarded or delaying hiring decisions while demand or their goods
and services remains uncertain. With the global economy still ragile,
organizations cannot aord to make an unsuitable hire, so they are instead
getting more out o their existing workorce to meet the modest uptick in
demand they are experiencing. But as organizations look ahead at the
looming talent shortage, a shortage already elt at the management level,they must begin to look or candidates, perhaps within the organizations, that
are a teachable tthat is they may not have all the capabilities required or
the job, but skills gaps can be lled in a timely and cost-eective way.
Upgrade the organizations HR strategy ormanagement-level talent: According to the2010 Business ClimateSurveyby the American Chamber o Commerce in China (AmCham-China),
HR issues have been the biggest challenge or AmCham-China members
over the past three years.10 The more experience a job seeker has, the more
likely they are to avor Chinese private-owned companies. According to
Manpowers2010 Foreign and Chinese Private-Owned Companies TalentCompetitiveness Survey, o those job seekers preerring to work or Chinese
private-owned companies, 61 percent are at management level and most
are rom oreign companies. This indicates that retaining management-level
talent is a burning issue that oreign companies must address. During a
period o rapid growth in the Chinese economy, one o the top priorities o
HR management in oreign companies must be to attract, train, retain and
develop high-potential talent.
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8 Winning In China: Building Talent Competitiveness
Winning the Talent War: Advice orChinese Private-Owned Companies
Create a strong employer brand: A wealth o data indicates that employerbrands are especially important or attracting senior managers. Chinese private-owned
companies need to create a strong employer brand that makes the organization a magnet
or management talent. Employer brands should identiy and ampliy the distinctive values,
character and style that set the organization apart rom others. It is an expression o an
organizations values and culture, and any given companys employer brand should be
unique. The key to building the right employer brand begins with identiying the distinctive
qualities o the organization that create an emotional connection between employer
and employee.
Create a compelling corporate culture: Corporate culture, as the basis orlong-term survival, development and ultimately success, plays an important role in attracting
and retaining talent. There is still a considerable gap between Chinese private-owned
companies ocus on their corporate culture and that o oreign companies. However, some
outstanding Chinese private-owned companies have successully shaped their own unique
corporate cultures as they have developed, which has increased their brand appeal. The
grass-roots culture o Anta, Chinas largest sportswear manuacturer, is a prime example.
Its culture is refected in its HR management so that competent, intellectually curious and
high-perorming workers are rewarded with advancement opportunities and avorable
compensation, regardless o his or her background and seniority. This helps Anta to attract
and retain diversied talent, improving an employees sense o belonging and allowing the
company to reap the benets o implementing ideas rom a variety o backgrounds.
Establish an appropriate management-level structure: As Chinaintegrates into the global economy, management o Chinese private-owned companies,
which has traditionally been extremely hierarchical, is increasingly inclusive and open to new
talent. For instance, long-serving senior employees will now resign rom leading posts or
become members o the executive management team to make room or a new generation
o executives. Leaders are now willing to delegate more to managers, improving managerial
competence in Chinese private-owned companies. Nevertheless, old habits die hard, and
so Chinese private-owned companies must clearly dene the rights, obligations and duties
o owners, operators and executors. They should also implement or improve assessments
and decision-making systems, particularly during the transition rom centralized todelegated management.
Refne the organizations HR management: As the market continues togrow, Chinese private-owned companies planning an IPO or international expansion are
nding it dicult to attract and retain talent as a result o inadequate HR strategies and
inecient recruitment.
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Fresh Perspectives 9
Fortunately, some o them are now aware o these diculties and are consciously
increasing their eorts to attract HR managerial talent. The demand or such talent is
eight times greater than the demand or HR talent at a non-management level.11
However, in stark contrast to the robust demand, only 35 percent o HR proessionals
avor work opportunities at Chinese private-owned companies. This indicates an
urgent need or the companies to better attract such talent.12
HR management needs to ensure that employees in unctional posts and at the
management level understand how their personal work goals support the business
objectives o the organization. Criteria or talent selection and assessment must be
designed to match the strategic development o the organization, with candidate
proles o competencies and qualications to ensure alignment. Thereore, high-
caliber recruitment teams should be developed to guide the recruitment process
in order to recruit the right talent. I necessary, Chinese private-owned companies
should establish a set o ecient and normative recruitment systems and
management processes with the help o a HR consulting partner.
In the meantime, in response to talent shortages, and especially to the global talent
shortage, Chinese private-owned companies should reserve key talent or IPOs and
overseas expansion.
Moreover, as Chinas labor market becomes more sophisticated, employees
awareness o their rights is also increasing, as is the quality o talent. Chinese private-
owned companies thereore urgently need to rene their HR management with
respect to labor and employee relations, perormance management, career planning
and development, and employee training and development. They must shit HR
management rom day-to-day management to developing employee potential,
which will also serve to systematically attract and retain core talent in alignment with
corporate strategy.
Anta preers those whose career development planning matches
the career platorm o the company. To be sure, there are risks in
employing talent rom another industry. Thats why Anta sets up a
one-year trial period or risk evaluation.
~ Yang Yong, HR Director, ANTA (China) Co., Ltd.
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10 Winning In China: Building Talent Competitiveness
Retaining oreign talent: Many Chinese private-owned companies aretroubled by a low retention rate o non-native, senior-level talent brought into the
company rom outside the organization. However, they still like to employ senior
oreign workers because o their international business experience.
To overcome low retention rates, companies should establish targeted strategies and
methods or retaining oreign employees. They should have a rm idea o the talent
required by clearly dening the skills and qualications needed as the organizations
business strategy evolves. During the selection process, they should identiy whether
the motives o the job seeker match the career platorms and values o the company
in order to ensure an optimal cultural t between the applicant and the job. Beore a
new employee starts a job with the company, clariy incentive mechanisms and set
up reasonable expectations and a trial period, so that he or she may ulll his or her
commitments made in being oered the role.
Seek advice rom an HR proessional service partner: It is typicalor Chinese private-owned companies not to have clear strategies or re-branding
and industry upgrading because many lack the relevant experience. In the absence o
adequate internal resources, the most eective way to solve this problem is to seek
help rom third-party consulting partners. With proessional support, the company
may complete its evolution toward proessional management rom top to bottom and
improve its organizational structure and remuneration policies. This will enable the
organization to rapidly improve its internal management systems and bridge the gap
with internationally recognized peers.
Lubrizol is a people-oriented company. Our attention, respect, care and relentless
eort to provide sustainable growth to our employees runs deep in our blood. This
culture is implanted throughout our organization. This is our DNA.
~ Wendy Zhang, HR Director, Lubrizol Asia Pacifc
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Fresh Perspectives 1
ConclusionChina is undoubtedly becoming a land o opportunity or both oreign and Chinese-based organizations.
The country is undergoing rapid growth which, coupled with shiting demographics and a growingawareness o the world outside its borders, is leading to changes in mindset when it comes to labor
and a real turning point in developmentaway rom actories that parachuted in to take advantage o
cheap labor, and toward a China determined to get a slice o the piein terms o both the domestic and
international market.
This means that both oreign and Chinese companies will need to adapt in order to stay ahead. Employers
must be alert to the shits in Chinas economy and understand the challenges as well as opportunities
that this will bring. Clarity o business objectives and the talent required to meet those objectives will be o
utmost importance, particularly as the war or talent will only become more intense as the global economic
recovery continues to gain traction.
1 Chinese Ministry o Commerce (http://www.mocom.gov.cn)
2 The next China, The Economist, 29 July 2010.
3 The Economist, op. cit.
42010 Foreign and Chinese Private-Owned Companies Talent
Competitiveness Survey, Manpower China, 2010.52006 China Employee Engagement and Retention Survey,
Manpower China, 2006.
62010 Foreign and Chinese Private-Owned Companies TalentCompetitiveness Survey, Manpower China, 2010.
72010 Talent Shortage Survery, Manpower Inc., 2010.
8 The Economist, op. cit.
9 The China Talent Paradox, Manpower China, 2006.
102010 Business Climate Survey, American Chamber oCommerce in China, 2010.
112009 Chinese Companies Talent Strategy Survey, ManpowerChina, 2009.
122010 Foreign and Chinese Private-Owned Companies TalentCompetitiveness Survey, Manpower China, 2010.
Reerences
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About Manpower Inc.in ChinaManpower Inc., the world leader o innovative workorce solutions, has been
serving the Chinese market since 1964. Today, Manpower has more than 400
recruiters operating in 20 cities across the nation.
Oering a wide array o HR services, we provide executive search and
selection and business solution (Manpower Business Solutions/MBS) services
through our Manpower Proessional brand. Manpower Business Solutions
oers our clients Recruitment Process Outsourcing (RPO), managed services
and recruitment consultation. Under our Manpower brand, we provide fexible
stang, basic stang and workorce solution services. We serve more than
3,500 clients, including local and multinational companies in China, and haveover 500,000 middle-level to senior-level candidates in our database.
Through our subsidiary, Right Management, we provide talent assessment,
leadership development, organizational eectiveness, employee engagement
and workorce transition services. In addition, Manpower China is partnering
with the Chinese government to support the countrys rapidly evolving labor
market by providing proessional talent assessment, career development
planning, human resource consultation and international experience exchange
service to governments and related organizations.
In addition, David Arkless, Manpower Inc. President o Corporate and
Government Aairs, was appointed Vice President o the China International
Council or the Promotion o Multinational Corporations (CICPMC) in July
2010. The CICPMC is the largest and most prominent institution in China
specically engaged in promoting and serving the businesses o multinational
corporations with investment in China and saeguarding the legitimate rights o
multinational corporations.
For more inormation about Manpower and its operations in China,please visit: www.manpower.com.cn.
2010, Manpower Inc. All rights reserved.
GC-33
Manpower Inc.
100 Manpower Place | Milwaukee, WI 53212 U.S.A
Tel: +1 414 961 1000 | www.manpower.com