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Three steps to success when setting up in China

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Setting up in China brings unique talent challenges

Many CEOs and HRDs are really struggling with talent in emerging markets. As someone who spends a lot of time with CEOs in China, I have seen this first-hand.

Talent in China is so hard to find that many CEOs privately tell me they are more worried about talent and HR than the customer and their current profits. Vincent Mo, CEO of property website Soufun.com, told me: “Our challenge is that we need people…Everything will depend on whether we have enough people to execute all the things we need to do.”

In truth, there is not enough qualified talent to meet the market’s growth, and CEOs in many competitive industries report they experience staff-turnover rates of 30%. Worse, China has some of the lowest engagement levels in the world. A 2013 BlessingWhite survey reported that only 22% of Chinese workers feel engaged.

So, what do Western companies need to do? I suggest the following.

1 Build a talent farm

Western companies remain focused on hiring key individuals, but local and regional competitors have a totally different approach. They recognise that they need industrial levels of talent.

“[Entering China], we recruited 700-plus people in one shot, even though we had no business in the first three years,” says Rangarajan Vellamore, CEO of IT services provider Infosys. Neusoft Corporation, Infosys’ largest Chinese competitor, now has 5,000 students a year graduating from its own university (founded in 1991) and colleges in Dalian, Nanhai, Chengdu and Shenyang. And Benson Tam, partner at venture capital firm Fidelity Growth Partners Asia, tells me: “Large companies are taking the entire graduating class of top national colleges. There’s no way around it.”

It’s important to think bigger, bolder and younger when hiring for China.

2 CEOs need to raise their personal leadership game

Leading China for a multinational company is one of the toughest executive jobs out there. Everybody wants a piece of the CEO. Plus, leaders are usually expats managing Chinese and global high-flyers. But Chinese talents are very different from those of their global peers, and take some getting used to.

Somehow, CEOs have to find a way to lead in both a Western and Eastern fashion: how to be respectful and relentless; to build long-term relationships, but also be transactional; to drive results, but also be patient for the long-term value.

The CEOs of Chinese workforces need to be able to build deep trust and to inspire. Getting staff to follow you requires a high level of leadership adaptability.

3 Evolve HR

In China, the HR department is often the least evolved. It can feel like being in a time warp, focused on administration and process rather than innovative ways of finding and developing employees.

The landscape is even more challenging as many Chinese employees were raised under the one-child policy by parents who lived through the Cultural Revolution. Talent is in high demand, which can lead to conflicting behaviours. Getting results while retaining and developing staff can take some getting used to for Western professionals.

HRDs need to find ways to develop talent systems that deliver performance and growth while also giving high-performers what they are looking for. This is doubly difficult because many CEOs are just looking to throw money at the problem – which only works in the short term.

I believe China, and emerging markets in general, present a one-off opportunity for HR to take a lead role and create talent ecosystems to support growth for the next 20 years. If this is done well, then the HRD can become the confidant of the CEO, and work together to ensure people remain at the heart of the company as it grows.

The companies that get this right can use the experience to achieve success in both emerging and developed markets.

Steve Tappin is CEO of Xinfu, host of the BBC World News series CEO Guru and a coach on HR magazine's HR in the Boardroom programme.