Orlando Jin, an engineer for the Ebay China Development Center, sits with his laptop on the train back home to Hangzhou, a city two hours away from Shanghai. He is communicating by email with his colleague in the U.S. who has just woken up. Jin, in his mid-20s, started to work for Ebay this March. Before that, he was hired by Hewlett Packard when it started to launch its development center in China three years ago.
“I like the culture of these two American companies because you feel you are respected and well treated,” he says. On the basis of his project experience with team members from U.S. and India, Jin he says that, compared with their Indian counterparts, the Chinese engineers need to improve their language abilities. “But we are all learning fast,” he adds, noting that the communication challenge will no longer be a problem “after a period of training and adjustment.”
However, Jin, who holds a diploma from one of the prestigious universities in China and grew up in the richest coastal province in China, also admits that China’s young graduates vary greatly in their qualities.
This is a key point highlighted in a report issued by McKinsey last November. The report claimed that every year, China produces only 160,000 science majors — out of the country’s entire pool of 3.1 million high school graduates — who are capable of working for MNCs. It’s not a number that is compatible with the striking growth rate in the region. About 400 of the Fortune 500 companies have invested in China up to now. The above-mentioned HP Development Center in China, which hired 80 people three years ago, has expanded to 2,000 employees and will probably increase even more. Its development center in India has 30,000 engineers.
“Every year there are 100,000 graduates from medical school and another 100,000 with a biochemical background. But they are not at the same level,” says George Chen, area vice president of GlaxoSmithKline, who oversees R&D operations in Mainland China and Hong kong: “Although not high in initiative and creativeness, China does have a huge base of ‘raw materials.’ One of the biggest challenges for MNCs in China is how to train the local talent so that they mature and meet companies’ expectations. It takes a serious and significant investment.”
Dilemma for MNCs
Compared with the problem of training and educating young talent, the shortage of experienced leaders is an even bigger challenge for MNCs. “China is short of experienced, seasoned talent,” Chen notes. Adds Johnny Lu, China human resources director at Andrew Telecommunications (China), an American company which produces telecom equipment in China: “In China, you could find a lot of good managers, but it’s very difficult to find people with strong leadership skills.”
Ramona Yan, director of consulting, Eastern China, at Hewitt Associates (Shanghai), elaborated on this issue. “On the whole, China is short of talent. Apart from those new occupations that were not even in existence in the past decade in China — like brand management, supply chain management or risk management — there is a shortage of individuals with international vision and management capability. We have very few people who can excel in … strategy, resource allocation, and merger and acquisitions, and steer the company in the right direction, given today’s competitive global environment.”
For seasonal management positions, adds Chen, “you have two ways to source: One is to import from the west and the other is to attract people from other MNCs or state-owned pharmaceuticals in China. But there are two matrixes: cost vs. potential. You could find external talent but the cost will go up, or you could train your internal talent but it takes a longer time.” Chen, a medical doctor in his mid-40s who is bi-lingual and bi-cultural and has an MBA from Wharton plus years of experience in the pharmaceutical industry, is one of the most sought-after people in the China market.
Lu looks at the issue based on his own experience: “Many companies are studying their HR strategy, looking at whether they should train people internally. Here is a dilemma for MNCs: I could train a lot of people today but they would be targets of my competitors tomorrow. Companies like GE and Philips have done a lot but it takes some risk.”
“You have to invest in training and encourage those people to put what they have learned into work,” adds Chen. “You have to make serious investments in overseas project assignments. But, what’s contradictory in China is this: The country is in a fast-growing and fast-changing period, the market is not very stable, and training strategies often can not be implemented well. Meanwhile, if you invest in someone who has good potential, you risk losing him.”
International Experience Needed
According to a survey with 300 CEOs to be published next month by Korn/Ferry International on the need for talent in China, the most important challenge for companies with operations in China is to have a leader with international experience. It’s much more important than quality of candidates, innovation or creativeness. The survey also says that the most suitable managers to lead a company’s operations now in China are returnees because they have exposure to multinationals and they understand both the west and the Chinese.
Since 1979, about 600,000 Chinese have gone abroad to study. Among them were around 30,000 who have obtained PhDs, and among those, a sizeable majority went into academia. It’s not clear how many of the rest could thrive in multinational business cultures.
“You have to redefine ‘returnees’ now”, Lu argues. “Are returnees those people who were born in China but get a foreign passport? I said many years ago that this definition would have to be changed. In today’s business world, you can’t define a talent by his passport or geographical location. You define him by his capabilities …”
Charles Tseng, president of Asia-Pacific for Korn/Ferry, is very optimistic: “Don’t forget that with a market opening up, there will be more people who can go outside China to study and to work. The number of people with international exposure will grow. Chinese people are more flexible, they learn faster, they adjust faster. … So I don’t think there will be a shortage of returnees. Before, people went out for 10 years and came back; now, people go for four, three or even one year. So later on, there will not be a clear line between returnee and non-returnee. Right now, there is a clear line. Also, people here are more exposed; there are more graduate business schools and people travel a lot. Typical consultants in my office here are not returnees. They travel two to three times every year, to Hong Kong, to the U.S. So there is a lot of exposure.”
Expats or Locals?
Lu, who is in his mid-40s, is the former senior HR director of a well-known multinational company in China. He is a native Shanghainese and has grown up in the local environment. He left his former employer after seven years when he was one step away from being a vice president. “There was never a truly local-grown talent who reached the position of VP with my former employer. In those big multinationals, you would see a lot of Chinese faces but they are not natives. … Every company says it has a clear strategy for localization. But it remains to be seen how much commitment they have to turning statements into practice.”
Yan has always been consulted by her clients on the question of whether they should continue to hire expatriates or get completely localized. Her answer is explicit: “These two approaches are not in conflict. My view is, the more thoroughly you get localized, the more it is possible for you to attract high-end local talent. There were many middle-level managers in MNCs leaving the company or going back to private or state-owned Chinese companies because they met the so-called “career ceiling.” The fact that many key positions, like marketing director, operations director, finance director, are in the hands of expatriates (including those regional Chinese from Hong Kong, Taiwan or Singapore, for example) makes them feel their career is being blocked. I think there has to be a breakthrough. Otherwise, the MNCs will lose a great many people who are very capable and who hoped to leverage their influence. On the other hand, expatriates have a big market in China as well. With China operations getting more global and complicated, there is a great need for expatriates who have experience in the west.”
“What is vitally important”, Lu says, “is that you send people out. As a multinational, you have to expand the vision of your local-trained managers. The future [belongs to] local talent who understand cross-boundary management and the western culture. A successful organization has to be able to import expatriates into China and also export Chinese managers out of China. And the organizations should be willing to take risk.”
Chen offers his suggestions to MNCs: “You can’t say that America is ‘this way’ and therefore we must do the same thing. The most important thing for MNCs is to effectively develop their own strategy, to take advantage of the Chinese society. What really counts is that the approach enables you to survive, to exceed, to prevail. Complaining doesn’t change anything. This is China. This is reality. You can’t change it.”
The final winner in the talent war in China, adds Yan, “will be those employers who have the patience and vision to realize the potential of their employees and set up a sustaining growing space for them.”
“The effort China has made to be integrated into the global business environment is unprecedented,” notes Chen, sitting in his office looking out at the newly-designed People’s Square in Shanghai. “The time it takes for talent in China to jump from one level to the next used to be five to seven years. Now it might take only three years. The future is bright.”