China: Debunking the Myths

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Reid Walker, a top Lenovo communications executive, explained his company's experience: "At Lenovo we adopted many HR policies from the legacy China business across our international operation (the legacy being IBM's (IBM) PC division). For example, our new performance management and incentive system is based upon many of the 'pay for performance' practices of our original China operation. These practices helped Lenovo grow from a small startup to a leading global multinational."

Most respondents agree that China operates a two-tier market in terms of HR. Multinationals make human resources part of their strategic planning, whereas Chinese companies tend to practice "personnel management" rather than integrate HR planning into the overall business strategy. Ruth Yu, HR manager at Textron (TXT) China, offers the reminder that "there were no courses in HR in Chinese universities 12 years ago. HR people have learned on the job."

MYTH FIVE: "Multinationals wishing to establish operations in China should hire Chinese 'returnees' who have valuable international experience, a non-Chinese perspective, and non-Chinese business education."

A company operating in China needs leaders that bring global perspective. However it is not the case that returnees are the only, or necessarily the best executives for providing such a perspective.

It is important to distinguish between two groups of returnees. First, there are managers who are native-born and educated, and second there are those who spent their formative years abroad. There are big cultural difficulties. Colleagues will treat them with confusion, particularly if the returnee speaks only English.

MYTH SIX: "The 'war for talent' is a Western phenomenon. No such war for talent exists in China where supply of talent outstrips demand among leading firms."

The rapid growth of China's economy increases competition for skill sets and talent.

Our executive respondents concur that there is just as much of a war for talent in China as in any other market, perhaps even more so. Opportunities and salaries are rising fast in China, and labor costs are going up. In many cases, executives are changing jobs every two to three years, usually for a 30%-50% increase in salary.

"The war for talent is very fierce in China. If anything, talent wars are worse than in Europe," concludes Bengt Hamsten, former CEO of MAN Truck & Bus.

MYTH SEVEN: "Since the reunification of Hong Kong and the People's Republic of China, the administrative and business relationships are seamless."

On the contrary: "One country, two systems" continues to be the rule for the relationship between Hong Kong and mainland China. To take one example: Where Western thought seeks one truth, Eastern thought proposes many truths, many answers to a question. The Western view is that "breakaway" cities are not allowed and things have to be run the same in every city, including the same values, politics, and economy. The Chinese view is that basically "as long as we know we are in charge, we are prepared to acknowledge that Hong Kong is different because of its history and separate development." Thus, Hong Kong has democractic elections, freedom of the press, a sound legal system and almost no corruption. In the broader view of Eastern thought, at least two apparently contradictory arguments can both be true.

MYTH EIGHT: "China is a low-cost manufacturer, not a platform for product and service innovation and the development of its own intellectual property."

China today is rapidly becoming one of the world's leading engines for innovation in proprietary technology. The Communist state legacy of "what's yours is mine" is being consigned to history with the development of China's own intellectual property structures.

This is an ongoing development and Trane's Francis Yuen takes us back to the fallacy of protectionist attitudes from multinationals in Europe and the U.S. "In the high-end goods market, it's time for multinationals to start watching their local competitors," he says. "They will start to develop high-end, competitive products, so the challenge is to develop a viable strategy for the long term and leverage resources and talent in China. Otherwise, the locals will eat your lunch as well."

In our next Asia Insight column, we'll offer Boyden's view on strategies for executive recruiting in China.

Charles Bien is managing director of Boyden China. Prior to joining Boyden, Bien was director of human resources at Caterpillar China and Yum! Brands Greater China. Bien has served as president of Institute of Management Consultants Hong Kong, and as a board member of the Association of Executive Search Consultants. He holds a master's degree in management science and engineering from Stanford and a bachelor's degree in Industrial Engineering from the University of Michigan. Brian Renwick is managing director of Boyden China. He is also vice-chairman of the Employers' Federation of Hong Kong, a member of the Housing Society and vice-chairman of the manpower committee of the Hong Kong General Chamber of Commerce. He has served as chairman of the careers advisory board of Hong Kong University and a member of the standing committee on disciplined services salaries and conditions of service.