Winning in China: - Experis.com - Manpower

Fresh Perspectives
Winning in China:
Building Talent Competitiveness

In This
Article
• China’s talent landscape is changing; Chinese companies are gradually
gaining traction on the international stage and foreign companies are
losing their appeal for Chinese workers, who now prefer to work for
Chinese private-owned companies.*
• Foreign companies operating in China will face greater challenges
finding the talent they need and will find it particularly difficult to retain
talent at the manager level where shortages are most severe. They no
longer have a reputation as the highest-paying and best employers.
• HR management in foreign companies are already feeling the effects of
competition from Chinese private-owned companies as they struggle
to attract talent, yet surprisingly few are responding to the challenge.
• Competition for talent can only intensify as Chinese privateowned
companies are ambitious about initial public offerings and
internationalization and more foreign companies increase their focus
on the Chinese market.
• In response to the escalating war for talent, foreign companies
must leverage HR as a strategic partner in order to ensure the
recruitment and retention of top talent over local private-owned
companies. They must also offer competitive salaries and
benefits, prioritize the development of future managers and
localize their talent strategies to the Chinese market.
• Chinese private-owned companies still face serious challenges in
modernizing their internal management systems. They still must invest
intensively in their human capital in order to compete effectively with
foreign companies for talent.
* Refers to companies not owned by the State.
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2 Winning In China: Building Talent Competitiveness

Introduction
For over three decades, foreign companies have
flourished in China. Many Fortune 500 companies
now have operations in the country, including:
General Electric, AT&T, General Motors, Microsoft
and Pepsi Cola. In April 2010, foreign direct
investment surged 24.7 percent year-on-year to
over $7 billion, according to the Chinese Ministry
of Commerce. 1
With a reputation as “golden brands,” foreign
companies have long been regarded by Chinese
workers as highly desirable places to work.
However, all that is starting to change. In the
wake of the recent financial crisis, many foreign
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 of disgruntled
workers who are seeking improved benefits. 2 It
seems that foreign companies are beginning to
lose their allure.
This comes at a bad time; China’s working
population is aging and the number of Chinese
workers ages 15-19 will fall dramatically after 2011,
according to the United States Census Bureau. 3
Maintaining their talent pipeline, particularly at the
manager level, is now a business critical issue for
foreign-owned companies.
Compounding the challenge for foreign
companies, more Chinese firms, both stateowned
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 foreign and Chinese privateowned
companies is beginning to turn in favor of
Chinese private-owned companies.
While this trend presents many opportunities
for Chinese private-owned companies—both
domestically and overseas—foreign organizations
will face greater challenges in finding the talent
they need to help them achieve their
business objectives.
A shifting talent
landscape
Manpower’s 2010 Foreign and Chinese Private-Owned
Companies Talent Competitiveness Survey indicates that the
lure of foreign-owned companies is now waning for Chinese
employees, with more preferring instead to work for Chinese
private-owned businesses. 4 The data reveals a clear change
in job seekers’ preferences; compared to the 2006 survey
results, the percentage of job seekers considering Chinese
private-owned companies as their first choice is up by five
percentage points, while those preferring foreign companies
is down by 10 percentage points (see Chart 1). 5 Chinese
private-owned companies are especially favored by job
seekers from South China where companies are relatively
more mature and generally have more modern management
systems. These companies, such as Anta, Vanke and
Heng’an, are well respected in their industries and have
good reputations as employers.
Chart 1: Individuals’ Employer Preferences
Which type of company would be your first
choice when you consider your next transition?
Chinese privateowned
companies
up 5%
Percentage of job seekers
considering Chinese private-owned
companies as their first choice is up
by five percent compared to 2006.
Foreign companies
down
10%
Percentage of job seekers
considering foreign companies
as their first choice is down by
10 percent compared to 2006.
Source: Manpower China
Fresh Perspectives 3

With talent shortages becoming more acute, and as fast-growing Chinese private-owned companies
become more competitive, foreign companies will find it increasingly challenging to retain managers.
Manpower’s survey indicates that this pressure will continue and even intensify as Chinese privateowned
companies have become markedly more attractive to management-level job seekers. 6 Sixty
percent of managers responding to the survey say that a Chinese private-owned company would now
be their first choice as an employer.
Chart 2: Primary Drivers of Company Preference
What are the primary reasons for choosing these companies?
43%
36%
Better
compensation and
benefits package
37%
31%
Better work
capabilities
Foreign companies face further competitive threats from Chinese private-owned companies which
have been investing heavily in talent, offering highly favorable compensation and benefits packages.
Consequently, foreign companies no longer have a reputation as the highest-paying employers.
Manpower’s survey reveals that 43 percent of job seekers view “better compensation” as the primary
reason to favor Chinese private-owned companies, seven percentage points higher than for those who
are attracted to foreign companies (see Chart 2). However, when it comes to corporate culture, Chinese
private-owned companies still lag behind their foreign counterparts. Only 20 percent of job seekers
view experiencing a new corporate culture as the primary reason to choose Chinese private-owned
companies, compared to 28 percent among those preferring employment with foreign companies.
These shifts in the balance of talent are already being felt among HR management of foreign
companies. Sixty percent say they feel the effects of competition from 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 few foreign companies are responding to the
challenge. The percentage of foreign companies who have taken countermeasures to improve their
talent attraction strategies is lower than, or almost the same as, that of Chinese private-owned
companies. The difference is especially evident when it comes to making an investment to secure
talent, including increasing compensation and benefits packages (a 10 percentage point gap) as well
as offering training incentives and learning opportunities (a 16 percentage point gap, see Chart 3).
4 Winning In China: Building Talent Competitiveness
Chinese private-owned companies Foreign companies
59%
48%
28%
22%
Better training
and learning
opportunities
52%
Facilitating
long-term career
development
20%
Experiencing new
corporate culture
and environment
16%
9%
Accommodating
better work/life
balance
Source: Manpower China
“As a global organization with operations in China, we are seeing the impact of this
shift in motivations of job seekers as some are becoming less loyal to the companies
they work for and more loyal to their purpose,” said John Rice, President and CEO of
General Electric Technology Infrastructure. “That’s why, at GE, we have intentionally
fostered a culture of continuous learning to increase the experience and exposure
we’re giving our employees and help develop their careers.”

A Critical Battle for Talent
So what does the future hold for foreign and Chinese private-owned companies competing for talent?
As growth continues, Chinese companies are generally ambitious about initial public offerings (IPO) and
internationalization. On the other hand, at the global strategic level, more foreign companies are significantly
increasing their focus on the Chinese market. This means that competition between the two groups to
attract and retain talent will only intensify as they seek to increase their footholds in the Chinese market.
Chart 3: Employer Measures to Attract
and Retain Talent
Given the increasingly competitive environment,
what measures will your company take to attract
and retain talent? (You may select more than
one choice)
Chinese private-owned companies
Foreign companies
Increasing compensation
and benefits packages
Offering better work
opportunities
Offering more training and
learning opportunities
Providing career planning
for employees
Improving employer
brand, shaping better
corporate culture and
environment
Adopting professional
HR services
No measures available at
present
8%
8%
22%
22%
33%
28%
39%
37%
51%
47%
47%
62%
67%
72%
Source: Manpower China
Winning the Talent War:
Advice for Foreign Companies
Maintain a flexible compensation system: When
foreign companies first started operations in China, Chinese
employees were offered remuneration similar to those of foreign
staff. Now, however, compensation and benefits offered to
executives by some Chinese private-owned companies are even
more attractive than those offered by foreign companies. Their
equity incentive plans are particularly effective in luring executive
talent away from foreign companies.
In addition, some foreign 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 half or even a third
of the salaries that foreign executives receive, even though the
latter’s performances are not necessarily any better than that of
local executives. Such unfair compensation distribution clearly
has a serious negative impact on local employees’ motivation to
work for foreign-owned companies.
Manpower’s annual 2010 Talent Shortage Survey shows
that skills shortages in China are most severe among senior
managers, so to win over scarce local talent, foreign companies
have to pay local senior managers at least as much as those
from overseas. 7 However, pay is rising across the board. In
fact, from 2002 to 2006 workers’ wages rose by more than
nine percent per year (in U.S. Dollars) nationwide, while wages
jumped by over 11 percent for those working in cities. 8 In order
to maintain sustainable competitiveness, it is critical for foreign
companies to exercise flexible compensation systems which
adapt quickly to market changes. Moreover, the frequency and
margin of pay adjustment should be based on the severity of the
shortages and demand for relevant talent in the market. Due to
the mismatch between supply and demand, it is not uncommon
for managers in some positions to receive an annual two-digit
percentage salary increase in order to retain them. 9
Fresh Perspectives 5

Many Chinese privateowned
companies
have started paying
attention to talent
development as
they experience fast
growth; some are
even developing their
own training schemes.
6 Winning In China: Building Talent Competitiveness
Leverage unique training opportunities: From the perspective of
talent retention and business costs, it is not a long-term solution to rely solely
on increasing compensation and benefits packages; companies poaching
talent with attractive remuneration should be wary of finding themselves stuck
in a vicious cycle as other companies poach their talent with even higher
wages. Although money is a critical factor in talent attraction, particularly for
management roles, it is by no means the only factor: 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 fast growth; some are even developing their
own training schemes. To stay ahead of the game in terms of employee training
and development opportunities, foreign companies should continue to leverage
their unique advantages, for example, by offering high achievers the opportunity
to experience diverse cultures and cross-country training, regardless of their
position, educational background or seniority. Foreign companies should also
combine successor planning with leadership training and maintain a strong
focus on employee development within the whole company.
Break the “glass ceiling”: Some foreign companies have started to
assign local talent to senior executive positions in China. This trend should be
encouraged, especially for Japanese and Korean companies, but most foreign
companies still appoint expatriate managers. This has led to many talented
executives choosing to work for Chinese private-owned companies in recent
years because they reached the “glass ceiling” at foreign companies—that is,
they could progress no further. This trend is confirmed in Manpower’s 2010
Foreign and Chinese Private-Owned Companies Talent Competitiveness
Survey, which reveals that 55 percent of management job seekers made
the decision to switch employers in order to benefit from long-term career
development. In fast-growing Chinese private-owned companies, mid-level and
senior-level managers are generously empowered and offered great promotion
potential—in some cases promotion is as frequent as once a year or even once
a quarter.
Leverage HR as a strategic partner: HR departments of foreign
companies must be leveraged as strategic partners in organizations’ business
development plans. For example, HR can add real value in securing the
talent needed for business expansion, as well as formulating and improving
strategies for talent flow, attraction and retention across countries, cities
and regions. Finding talent to fuel business expansion in particular can be
challenging for foreign companies targeting second- and third-tier cities or
even smaller markets in China. In addition to coping with high turnover of
managers in first-tier cities, they have to attract and recruit a large number of
business development staff each year. However, cross-regional HR allocation
in China is not straightforward. First, it is challenging to move and retain talent
in emerging markets, which lag behind first-tier cities in terms of education,

medical resources, service facilities and overall standard of living. Second,
Chinese private-owned companies, who are better at “encircling cities
from rural areas,” transfer their research and development and marketing
centers to first and second-tier cities where talent is plentiful, such as Beijing,
Guangzhou, Shanghai, Xiamen and Shenzhen. This leads to increasingly
fierce competition for management-level talent between foreign and Chinese
private-owned companies.
To gain an advantage in the current talent war, foreign companies should not
only regularly review their compensation incentive systems and employee
benefits according to the local market, but HR departments must also
consider how best to develop high-potential employees from the perspective
of a mid- and long-term business strategy.
Prioritize development of management talent: Due to the
pronounced shortage of talent at the management level, foreign companies
need to pay particular attention to prioritizing the development of employees
at that level. As competition for talent escalates, foreign companies must be
highly responsive to trends in the labor market and ensure that they do not
just become a training ground for individuals who then leave to grow their
careers with Chinese private-owned companies.
Today, when there is no perfect candidate for a position, companies are
being rewarded for delaying hiring decisions while demand for their goods
and services remains uncertain. With the global economy still fragile,
organizations cannot afford to make an unsuitable hire, so they are instead
getting more out of their existing workforce to meet the modest uptick in
demand they are experiencing. But as organizations look ahead at the
looming talent shortage, a shortage already felt at the management level,
they must begin to look for candidates, perhaps within the organizations, that
are a “teachable fit”—that is they may not have all the capabilities required for
the job, but skills gaps can be filled in a timely and cost-effective way.
Upgrade the organization’s HR strategy for
management-level talent: According to the 2010 Business Climate
Survey by the American Chamber of Commerce in China (AmCham-China),
HR issues have been the biggest challenge for AmCham-China members
over the past three years. 10 The more experience a job seeker has, the more
likely they are to favor Chinese private-owned companies. According to
Manpower’s 2010 Foreign and Chinese Private-Owned Companies Talent
Competitiveness Survey, of those job seekers preferring to work for Chinese
private-owned companies, 61 percent are at management level and most
are from foreign companies. This indicates that retaining management-level
talent is a burning issue that foreign companies must address. During a
period of rapid growth in the Chinese economy, one of the top priorities of
HR management in foreign companies must be to attract, train, retain and
develop high-potential talent.
Fresh Perspectives 7

Winning the Talent War: Advice for
Chinese Private-Owned Companies
Create a strong employer brand: A wealth of data indicates that employer
brands are especially important for attracting senior managers. Chinese private-owned
companies need to create a strong employer brand that makes the organization a magnet
for management talent. Employer brands should identify and amplify the distinctive values,
character and style that set the organization apart from others. It is an expression of an
organization’s values and culture, and any given company’s employer brand should be
unique. The key to building the right employer brand begins with identifying the distinctive
qualities of the organization that create an emotional connection between employer
and employee.
Create a compelling corporate culture: Corporate culture, as the basis for
long-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’ focus on their corporate culture and that of foreign companies. However, some
outstanding Chinese private-owned companies have successfully shaped their own unique
corporate cultures as they have developed, which has increased their brand appeal. The
“grass-roots” culture of Anta, China’s largest sportswear manufacturer, is a prime example.
Its culture is reflected in its HR management so that competent, intellectually curious and
high-performing workers are rewarded with advancement opportunities and favorable
compensation, regardless of his or her background and seniority. This helps Anta to attract
and retain diversified talent, improving an employee’s sense of belonging and allowing the
company to reap the benefits of implementing ideas from a variety of backgrounds.
Establish an appropriate management-level structure: As China
integrates into the global economy, management of 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 from leading posts or
become members of the executive management team to make room for a new generation
of 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 define the rights, obligations and duties
of owners, operators and executors. They should also implement or improve assessments
and decision-making systems, particularly during the transition from centralized to
delegated management.
Refine the organization’s HR management: As the market continues to
grow, Chinese private-owned companies planning an IPO or international expansion are
finding it difficult to attract and retain talent as a result of inadequate HR strategies and
inefficient recruitment.
8 Winning In China: Building Talent Competitiveness

Fortunately, some of them are now aware of these difficulties and are consciously
increasing their efforts to attract HR managerial talent. The demand for such talent is
eight times greater than the demand for HR talent at a non-management level. 11
However, in stark contrast to the robust demand, only 35 percent of HR professionals
favor work opportunities at Chinese private-owned companies. This indicates an
urgent need for the companies to better attract such talent. 12
HR management needs to ensure that employees in functional posts and at the
management level understand how their personal work goals support the business
objectives of the organization. Criteria for talent selection and assessment must be
designed to match the strategic development of the organization, with candidate
profiles of competencies and qualifications to ensure alignment. Therefore, highcaliber
recruitment teams should be developed to guide the recruitment process
in order to recruit the right talent. If necessary, Chinese private-owned companies
should establish a set of efficient and normative recruitment systems and
management processes with the help of 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 for IPOs and
overseas expansion.
Moreover, as China’s labor market becomes more sophisticated, employees’
awareness of their rights is also increasing, as is the quality of talent. Chinese privateowned
companies therefore urgently need to refine their HR management with
respect to labor and employee relations, performance management, career planning
and development, and employee training and development. They must shift HR
management from “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 prefers those whose career development planning matches
the career platform of the company. To be sure, there are risks in
employing talent from another industry. That’s why Anta sets up a
one-year trial period for risk evaluation.
~ Yang Yong, HR Director, ANTA (China) Co., Ltd.
Fresh Perspectives 9

Retaining foreign talent: Many Chinese private-owned companies are
troubled by a low retention rate of non-native, senior-level talent brought into the
company from outside the organization. However, they still like to employ senior
foreign workers because of their international business experience.
To overcome low retention rates, companies should establish targeted strategies and
methods for retaining foreign employees. They should have a firm idea of the talent
required by clearly defining the skills and qualifications needed as the organization’s
business strategy evolves. During the selection process, they should identify whether
the motives of the job seeker match the career platforms and values of the company
in order to ensure an optimal cultural fit between the applicant and the job. Before a
new employee starts a job with the company, clarify incentive mechanisms and set
up reasonable expectations and a trial period, so that he or she may fulfill his or her
commitments made in being offered the role.
“Lubrizol is a people-oriented company. Our attention, respect, care and relentless
effort 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 Pacific
Seek advice from an HR professional service partner: It is typical
for Chinese private-owned companies not to have clear strategies for re-branding
and industry upgrading because many lack the relevant experience. In the absence of
adequate internal resources, the most effective way to solve this problem is to seek
help from third-party consulting partners. With professional support, the company
may complete its evolution toward professional management from 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.
10 Winning In China: Building Talent Competitiveness

Conclusion
China is undoubtedly becoming a land of opportunity for both foreign and Chinese-based organizations.
The country is undergoing rapid growth which, coupled with shifting demographics and a growing
awareness of the world outside its borders, is leading to changes in mindset when it comes to labor
and a real turning point in development—away from factories that parachuted in to take advantage of
cheap labor, and toward a China determined to get a slice of the pie—in terms of both the domestic and
international market.
This means that both foreign and Chinese companies will need to adapt in order to stay ahead. Employers
must be alert to the shifts in China’s economy and understand the challenges as well as opportunities
that this will bring. Clarity of business objectives and the talent required to meet those objectives will be of
utmost importance, particularly as the war for talent will only become more intense as the global economic
recovery continues to gain traction.
References
1 Chinese Ministry of Commerce (http://www.mofcom.gov.cn)
2 “The next China,” The Economist, 29 July 2010.
3 The Economist, op. cit.
4 2010 Foreign and Chinese Private-Owned Companies Talent
Competitiveness Survey, Manpower China, 2010.
5 2006 China Employee Engagement and Retention Survey,
Manpower China, 2006.
6 2010 Foreign and Chinese Private-Owned Companies Talent
Competitiveness Survey, Manpower China, 2010.
7 2010 Talent Shortage Survery, Manpower Inc., 2010.
8 The Economist, op. cit.
9 “The China Talent Paradox,” Manpower China, 2006.
10 2010 Business Climate Survey, American Chamber of
Commerce in China, 2010.
11 2009 Chinese Companies’ Talent Strategy Survey, Manpower
China, 2009.
12 2010 Foreign and Chinese Private-Owned Companies Talent
Competitiveness Survey, Manpower China, 2010.
Fresh Perspectives 11

© 2010, Manpower Inc. All rights reserved.
GC-33
About Manpower Inc.
in China
Manpower Inc., the world leader of innovative workforce solutions, has been
serving the Chinese market since 1964. Today, Manpower has more than 400
recruiters operating in 20 cities across the nation.
Offering a wide array of HR services, we provide executive search and
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2010. The CICPMC is the largest and most prominent institution in China
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please visit: www.manpower.com.cn.
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