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?