Tapping China’s Human Capital

Shaun Rein’s article in the May 27th edition of Forbes, “How Multinationals Err In China,” is one of the best I’ve seen on the subject of human resource practices in China. What surprised me, however, were some of the negative reactions to certain aspects of the article which appeared in the blogs afterwards.

First, on the subject of the article itself, I found it enlightening because the results of the research done by Mr. Rein’s firm, China Market Research Group, square completely with my own thirteen year’s experience in China. Educated Chinese managers understand that there are substantial opportunities in China today, and are extremely sensitive to whether the company they work for is helping them to take advantage of these opportunities. When they see one of their classmates who has set up his or her own company and is doing well financially, or another who is working for a multinational or local company and receiving opportunities for advancement, the natural questions they ask are: “How am I doing? Am I getting career growth opportunities? Am I getting the training needed for me to develop professionally?” In this context, simply paying a higher salary will not keep Chinese managers. If there is a glass ceiling and a limit to advancement, or if the employer is not investing in training its managers and employees, they will leave. Mr. Rein’s research is right on.

The negative reactions that I read were mostly focused on the article’s comment about the danger of having a two-tier pay system inChina—one for expatriates from the home office and overseas Chinese, and another for the local Chinese managers. Many of the reactions were quite cynical, questioning, for example, whetherChina even had a universe of capable managerial talent to work with; flatly stating that an education in a Chinese university is nowhere near the equivalent of one in the West; or defending expensive expat packages because China is a “crap country” to work in. With this as an undercurrent, the notion of giving the same packages to local managers was seen as absurd.

In my opinion, however, that’s not what the article was saying. Mr. Rein was merely making the point that multinationals have to learn to rely more on local managers, and be sensitive to the fact that having a large number of expats in China with vastly different compensation schemes can be demotivating to their local managers. I believe that combining capable managers who have global experience, with capable local managers who know how to work in the China market, is the right formula for long term success. It’s a matter of degree and maintaining the right balance. I have found that Chinese managers respect, and will readily accept, foreign managers who are willing to “roll up their sleeves” and work with them and whom they can learn from. They understand that economic circumstances in Western countries are different and do not begrudge higher compensation packages to Western managers who fit this description. Is it so different anywhere else?



2 Responses to “Tapping China’s Human Capital”

  1. I’ve watched the compensation close in with some local people that I know but but the difference is still pretty large, even at the entry level. When I first arrived in Beijing I started working for a real estate company that did nothing but find rentals for foreigners. The compensation in this model comes from the landlords so it is usually a good deal for someone if they are looking for a decent place at a low to mid range price in Beijing. I started working there primarily to sharpen my Chinese skills but found myself learning a lot more than just language skills. While I was bringing in foreign clients here and there, I became fast friends with one of my colleagues by spending time at the office. Over the last year and a half I have been witness to his standard of living rising noticeably as he rents more and more places and more and more foreigners come to use his services. Despite the prime market here in Beijing, his rise wasn’t as easy as one might think. This guy works around the clock hunting for places, showing units, and making about the same amount of money that I was making working a couple days a week. Actually, I think he is one of the hardest working people I have met here. He never said it, but it I could tell he was well aware of the amount of time he put into closing a deal and how much time I spent on just hearing from someone that they were looking for a place. A couple times, well after I stopped working at the real estate company yet continued to use their services, my colleague was very direct and it was more obvious than usual what he was thinking. He asked me once, “how much money does someone with my job make in your country.” I estimated he would make about 35,000 USD annually if he lived in a big city and hustled the way he does. He just pursed his lips and nodded at my estimate. Then he asked me how much I make monthly here in Beijing. Now if you compare what i make here and what my peers make in the U.S. you might be tempted to point and laugh at me, but I saw where this was going and I flat out lied to him and told him I make much less than I actually do, about 40% less than I actually do, to be exact. Even at that number my old colleague pursed his lips again and just said, “you guys really live a good life here.”

  2. People leave jobs in China for the same reasons that people leave jobs in other places — work environment that is not up to their expectations in terms of advancement and learning opportunities (these may or may not be realistic but who is to judge), managerial capability or style, of course, compensation.

    When all other factors remain the same, but there are offers of double your salary, well, then it certainly makes you consider a job/career change. And that is exactly what is happening in this market — I’m not saying that EVERYONE who leaves their job has been guaranteed double pay. That said, I am astounded at the number of friends and (now former) colleagues to whom such offers have been made. In a market such as this, I see Rein’s “Employers Beware” point (especially since you’re competitor is willing to hire someone who has had less than 1 year stints at their last 2 posts). As my headhunter friend says “this is an employees market.”