April 2010

By Wells Tian, Head of Aon Consulting Beijing

During the economic downturn, some companies were so focused on financial challenges that they neglected to keep their executives actively engaged. The downturn turned out to be a short-term phenomenon; but companies that neglected their talent during this crisis may be shocked by the repercussions as the market turns around. As we have learned from past experience, when the market improves and more job opportunities open up, job hopping among professional staff can increase alarmingly. For many enterprises, hiring and retaining good talent may not be smooth-sailing despite the recovery of the overall market.

More responsibilities and tasks

Our consulting experience working with companies in China show that what matters the most to executives in their longevity with an employer is "a job that is challenging and rewarding." Often, though, executives become disillusioned with their job when they feel that their skills and talents are not being adequately utilized. Providing challenging work opportunities and testing leadership capabilities is essential to retain talented executives. At the same time, it also helps the company in identifying and nurturing its next round of leaders.

Challenging executives to perform under difficult circumstance is especially critical during gloomy periods. Performance during good times may not be wholly due to their abilities and skills. However, during adverse situations, the impact of the individual's efforts to address the problems they face can more readily be observed. The downturn is the perfect showcase enabling such executives to display their resourcefulness and capabilities.

China Vanke, the nation's biggest listed property developer, sets a good example for local enterprises in China in this regard. In past years, when the property market was doing well, they annually brought in their top managers for leadership training and for discussions on their personal development. Despite the property market difficulties of the past two years, they maintained their investment in leadership development, but cut costs in other areas. This is because China Vanke's HR head and management strongly believe that leadership is the key that determines how much and far China Vanke can go.¹ 

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Create a more equal environment

Nurturing and developing local managers is also a key issue for many foreign-invested enterprises in China. However, foreign companies frequently take a short cut to solving their executive talent shortage, which ultimately can create more problems than it solves. When recruiting management personnel, they often seek or dispatch those from Hong Kong and Taiwan. Although these executives are usually very professional, they often lack practical experience in China and know little about the Chinese market. Moreover, their salaries are usually exceptionally high by Chinese standards, and are accompanied by attractive benefits such as luxury company cars, grand condominiums, and children’s education. All of this adds up to be far more than what local managers are getting.

Imbalances like these can cause talented Chinese executives to be irritated or resentful and they may leave in a huff. In addition, relying on foreign managers who lack a real understanding of China's market may not be a wise decision. Enterprises that do so may inadvertently create adverse consequences to team spirit and employee loyalty. Perceptions of compensation inequities and a "glass ceiling" to advancement may motivate well paid top-performing executives to look for new career opportunities.² 

Chinese nationals have started to express their dissatisfaction with foreign venture enterprises evidencing a strong bias toward foreign managers. Many talented executives are opting for local pioneers, such as Lenovo and Huawei, instead of preferring foreign-invested enterprises as they did five to 10 years ago. With the maturing of local enterprises accompanied by greater professionalism, these executives are often thrilled to be part of fast-growing entrepreneurial firms. Despite the fact they may initially receive less compensation than they would with a foreign company, they often feel more respected in Chinese enterprises and believe they will have more room for advancement.

Local enterprise Li Ning is an outstanding example of this trend. Li Ning stresses employee development. They have designed detailed training courses and strategies to help employees to steadily upgrade their skills through methods such as duties-rotating, speed training camps, and action learning.

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More training opportunities and skills upgrading

Many foreign firms recognize the risks outlined in this article and are focused on upgrading the capabilities of their local executives, rather than continuing to rely on foreign imports to fill top management positions. Well-known global logistic giant Maersk has always emphasized employee training. Their philosophy is that 70% of skill and knowledge development comes from daily work, 20% from mutual studying and co-workers' sharing, and 10% is from classroom training. The company has created a systematic training program for both fresh graduates as well as experienced professionals. Their employees attend tailored-made programs encompassing a diverse range of training. And, at the same time, the company offers a mentor program for new hires. A senior staff member is paired with a new hire to enable him/her to quickly feel a valued a member of the organization and able to contribute productively.

Another logistics company, APL, uses a highly successful on-line training program called "Global Campus". It offers the full spectrum of knowledge and skills development that employees need, e.g., APL's history, usage of office application software, and business communication and negotiation skills. People only need to open their computer, access "Global Campus", to access these on-line courses.³ 

Successful foreign investors, such as L'Oreal and Starwood, have also started placing Chinese staff into short-term assignments abroad in order to upgrade their capabilities. Opportunities like this are very popular within the company and have built a very positive brand image among their employees. Employees feel that the company is placing great emphasis on their personal development and is investing in their personal growth.⁴ 

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Conclusion

China's HR environment is rapidly evolving as local firms gain greater confidence and capabilities and foreign firms adjust to the new realities. Those firms that neglected their best performing executives and who continue operating under old paradigms, without regard to the changing landscape, are likely to face increased risk of losing their best talent. But, those who responded to recent economic challenges and increased competition by nurturing and fully engaging their own executives' are likely to be rewarded with a stronger, more capable pool of executive talent pool and greater loyalty from their top-performing executives.

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Contact

Wells Tian is the Head of Aon Consulting in Beijing. You can contact Wells at wells_tian@aon-asia.com. 

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Notes: