The War for Talent in China

2015 marks the 37th anniversary of the policy that opened China up to the world by allowing foreign businesses to invest in the country. Over this period, especially the past two and a half decades, hundreds of thousands of multinational companies entered this market. These MNC’s were — and still are – looking to develop their local talent, and at the same time more Chinese nationals now have the opportunity to study and work internationally. Logically, you would expect these two developments to make it easier for MNC’s to find the necessary talent in China.

On the contrary, the war for talent is only getting tougher — in addition to competing with other MNC’s within and even across sectors, international organisations are now also losing out to local companies. In fact, two groups of employers have become strong competitors for MNC’s in the increasingly severe battle for talent — well established State Owned Enterprises (SOE’s), and local private companies, including start-ups. MNC’s have noticed this and have concluded that, as China is no longer a cheap market, they simply cannot compete with these organisations that are paying top dollar/RMB. However, is this the whole story, or is there more to it? Do MNC’s really understand why they are losing out?

A Bit of History — Three Phases

When the first batch of MNC’s arrived in China in the late 80’s and early 90’s, talent was not easy to find. Back then, young people with high potential were typically chosen by the government organisations or large SOE’s and were offered what people called the ‘iron bowl,’ which represented lifelong career stability. To give up the ‘iron bowl’ and work for foreigners who didn’t know much about China took significant courage, and also a great deal of persuasion to convince your family that this was a good option. Not many were open to the uncertainty these ‘outsiders’ presented in the early days.

Thanks to the open door policy, the initial talent pool that MNC’s managed to attract, were those longing for more excitement than stability, who were typically curious about the outside world as a result of language studies and/or cultural exposure (eg. literature, news, and movies). As these brave forerunners went out in their suits and ties, peers and families were simply wowed. To their surprise, working in an MNC meant a much higher salary, fashionable offices in downtown areas, five-star hotels when travelling for business, and overseas trips every year. It seemed the sky was the limit, and the MNCs had won the phase I battle.

The next ten years saw competition (Phase II), primarily amongst the MNC’s themselves. The pool of qualified talent was clearly getting larger, as more and more employees were trained in these international systems. Simultaneously, more Chinese nationals with overseas education and work experience returned to their homeland, and there was an obvious preference for MNC’s among those returning to China. However, in the most recent decade (Phase III), local companies have caught up to MNC’s in many ways, and as a result, the competition for talent has become even more fierce.

Money Does Matter

As a number of Chinese SOE’s have moved up the rankings on the Fortune 500 list, and many other private local companies aspire to become global market leaders, these organisations have targetted the top talent within MNC’s. Well trained in industry best practice, and exposed to international management mindsets, this group is expected to bring in a new world view helping these businesses reach the next level. To win over this group and achieve their goals, local companies are willing to pay. With less complex internal bandings and salary rankings, these organisations can make offers that are too good for almost anyone to refuse. As the living expenses in China have continued to increase, particularly in Tier 1 and Tier 2 cities, working for an MNC no longer guarantees a decent lifestyle for young people. There is an old Chinese saying, human beings go for fortune as birds go for food. Driven by financial incentives, including both higher guaranteed salaries and attractive pre-IPO stock options, the choice has not been difficult to make. All of China has heard the genuine stories of thousands of millionaires, and even billionaires, that have been created overnight when Chinese companies have floated on the New York Stock Exchange or Nasdaq.

The Entrepreneurial Dream – Chinese Style

While money does matter, it is not the ‘be all and end all’. A painful career bottle neck for many middle-aged and experienced professionals has also contributed to the move back to local organisations. Even though MNC’s have made significant efforts to localise their leadership teams in China over the years, there are still only a handful of senior positions within most organisations that are available to Chinese nationals. In addition to this, with increasingly complex matrix structures in place, the real decision makers are often not on hand to promote locals, so there can be an undeniable glass ceiling preventing progress.

On the other hand, the younger generation is stepping up quickly with more energy, innovative ideas, and ambition, creating a situation where the sandwiched middle-aged talent needs to find an exit. Many aspire to become true decision makers, to make an impact, bring change into an organisation, and become the engine to drive a smaller machine, rather than staying on as what may feel like an insignificant part of a big system. To these middle agers, life in a local company where they are given bigger teams to lead, more money to invest, and more authority and respect, does bring a stronger sense of achievement. With proper incentive plans to support, they actually get to realise their entrepreneurial dreams and become the real boss.

A Career is a Marathon

We have all heard the saying that life is a marathon, and so is one’s career. A strong head start certainly helps, but it doesn’t guarantee that you will make it to the finish line. There was an interesting story going around the WeChat (a mobile text and voice messaging communication service developed by Tencent in China, which is the largest standalone messaging app by monthly active users) platform recently, which was actually based on a true story. Two friends from a medical college made different choices upon graduation — graduate A joined a local hospital, as most of the medical graduates did, whereas B decided to work for a global pharmaceutical company as a medical sales representative. At their 10 year graduation anniversary celebration, B came in an expensive car and branded accessories head to toe. As the Sales Director for an MNC, he had sponsored A to attend several academic events which A’s humble funds wouldn’t have allowed. At their 20 year graduation ceremony, B was still in expensive outfits, but looked tired and much older than most of his classmates. He had changed companies several times, but was still doing the same job and fighting to meet ever-increasing sales targets. On the other hand, A had become a sought after speaker presenting cutting-edge discoveries in his field at various academic events.

The story describes two different career tracks that we may not be able to compare; however, it does reveal the awkward situation these MNC ‘white collars’ are facing. With the increasing cost of living and inflation of the currency, the financial advantage of working for an MNC is no longer significant, which has brought the non-financial advantages back into consideration. These might include social status, networks or what the Chinese call ‘Guan Xi’, and stability. While it may not be possible to have it all, a better balance is definitely needed to maintain the motivation to reach the finish line.

Wining Talent Through Understanding

With more than 30 years of experience developing the Chinese market, MNC’s have faced many challenges in the war for talent, and they have also
contributed tremendously to the developmen of China’s talent market. Phase III of the talent war emerged without warning, and organisations across the board are now faced with the challenge of how to win this new battle. There are certainly numerous and varied success factors, including a thorough understanding of what motivates the current generation of talent. Looking at the success stories, one thing is clear – the true leaders have always been those who have taken the time to thoroughly understand, respect, and embrace the culture of the nation.

Katherine is a Director with the Chapman Consulting Group and leads many of the firm’s Senior HR searches in China. Originally from Beijing, Katherine now splits her time between China and Singapore.


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