HR Magazine, March 2001: Recruiting in China

By Stephenie Overman Mar 1, 2001

Overcoming cultural differences and a scarcity of workers is a tough—but attainable—goal.

An “adventure” is what Dave McCann calls the quest to recruit and retain good workers in the rapidly changing economy and market in China.

“The opportunities are great, but they create HR challenges,” says McCann, who is based in Beijing and has responsibility for HR activities for PricewaterhouseCoopers throughout China.

The country may have a population of 1.3 billion people, but there’s a war for talent as fierce as in many parts of the Western world, he explains.

Carrie Conlon, director of human resources for Nanjing Interbrew Breweries in Nanjing, says China is undergoing significant changes and wants a market economy. “But they don’t have the talent,” she explains. “They haven’t recognized the need to train people to go into that type of economy.”

And managers are particularly hard to find. “The challenge is finding managerial talent,” she says. “You can’t find a marketing director to save your soul.”

The reason: While many Chinese professionals have good technical educations, few have managerial training because in the past managers were promoted based on their political party allegiance. “There never had been any selection criteria; it was not attached to skills,” she says.

While managers are in particularly short supply and attracting good ones can present a special challenge, the truth is that recruiting for any position in China can require a whole new outlook. In some cases you may need to rethink what you know about finding and hiring talented workers because, when it comes to recruiting, China has its own particular rules of the road.

Do’s and Don’ts

As in other countries, companies operating in China can use campus recruitment, job fairs, newspaper advertisements, search firms, internal referrals and the Internet to search for the right talent. But, “in terms of hiring, there are more than a hundred ‘do’s and don’ts,’” says P.O. Mak, president of the Hong Kong Institute of Human Resource Management.

“First of all, you have to know where you are and what kind of people you wish to hire. And then, a thorough knowledge of applicable law is important,” says Mak.

Given the complexity of the market, Annella Heytens of Watson Wyatt urges U.S. companies to develop a well-thought-out recruitment strategy that spells out screening and interviewing methodology.

“Do not look for the perfect candidate—he or she does not exist,” Heytens says. Other mistakes: being inflexible with the benefits package and taking too long to interview or make an offer, in which case, “You may lose a good candidate,” she warns.

In addition, she warns not to market the company too optimistically or negatively. “Be realistic when describing the working conditions,” she says, because new workers “may not stay too long if you misrepresent the company.”

When interviewing, don’t be fooled by “a perfect accent and Oxford English,” Mak warns. “You still need to probe into values and experience. In the older days, many firms hired people primarily because of language proficiency. Don’t do this anymore. I put values first because unfortunately—due to education systems, culture and norms—we tend to see a big gap between ‘our’ values and ‘their’ values, and this can make or break a working relationship.”

Conlon warns that Chinese interviewees “may not be polished. Be cautious not to make a judgment on that.”

Unlike Heytens, Conlon advises conducting several interviews because people in the Chinese culture tend to be less direct than in Western cultures, and they “take a long time to say what they want to say. Bring them back, so they feel comfortable and you get the information you need. Tap into their true potential. The system is not geared to helping people know their own potential.”

Michael Colozzi—general manager for Portola Packaging Inc. in Shanghai—agrees. “Everyone I hired on my immediate staff I interviewed five times,” he says. “In two cases, I gave people minor assignments to prepare presentations. I tested them. I let everybody know I was extremely serious.”

Camille Elliott, who returned from Beijing last year to work as a recruitment manager for Price-waterhouseCoopers in the San Francisco area, also made use of multiple interviews in China. In fact, Elliott would regularly ask a Chinese native and someone from the West to interview and assess a candidate’s ability to balance Western and Chinese styles of management. The Chinese management style tends to be very directed, she says, and Chinese managers “tend not to have the coaching skills that you as a Westerner would like to see.”

This lack of managerial skills can be overcome, says Colozzi. Chinese managers “don’t like to make decisions without having 100 percent of the facts,” he explains. “In the United States we’re not reluctant. If we make a mistake, we clean up the mess and start again,” he says. But he has found that Chinese managers can learn to make direct decisions “and you’ll be amazed at how creative they are at solving problems.”

Conlon adds that references are easy to obtain in China. “You can call up a previous manager and ask for a reference. People have been pretty open.”

Recruiting Recent Graduates

Competition for workers has heated up on campuses. Students are “looking for high-paid, challenging work,” says C.P. Lee, HR director for Motorola (China) Electronics Ltd. In the past, new graduates usually went to government jobs, but “recently the government has relaxed the rules, allowing them to join foreign-owned companies and joint ventures.”

Motorola and many other companies offer internships to lure recent graduates. During the campus recruitment season—from October until December—companies go to each university and meet with students.

The university controls much of the process, according to Lee, who has worked in China for six years. Foreign companies are required to pay a fee to the university’s education fund to cover part of the cost of the student/hiree’s education, he says. That usually costs about $1,500 to $2,000 in U.S. dollars for a bachelor’s degree.

“Most students come prepared with questions about benefits and the type of training the company can provide. They also ask about location. They want to go to the cities seen as the most open in China,” according to Lee, such as Beijing and Shanghai.

When McCann came to China from the United Kingdom in 1997, young graduates were naïve, he says. But today he finds them better prepared. “They are more savvy about how they present themselves, in how they develop relationships” with companies, he says.

Colozzi also finds young workers quite savvy. “I’m amazed at the number of young people who come to see me who have taken it upon themselves to look up our web page and have done basic research on companies.” He finds workers younger than 30 “very hungry to learn things. If they feel the boss is going to be a good teacher, you’ve got the battle half won.”

Attracting Experienced Workers

Experienced workers in China also want to learn new tasks and to work for companies that provide opportunities for growth and travel, according to the HR professionals interviewed for this article.

First on their list is training, Lee says. “They want good exposure to modern management and new technology, the opportunity to go overseas and to have career advancement.”

According to McCann, Chinese professionals “are looking to build their resumes by working with a company that is well recognized. They like working alongside expatriates; they recognize that they can learn from them about the behavioral characteristics it takes to be a professional in the West.”

At the same time, state-run companies are becoming more efficient—and better able to compete for talent, McCann says. “They are becoming attractive places for some people who want to work for a Chinese company, not just be a steward of a multi-national company.”

Salaries are getting more competitive in state-run companies as well, but there is still a gap. “People who leave us are predominately going to multinationals,” says McCann.

One possible source of talent for multinational companies is Chinese nationals who have been working in other nations. “Many Chinese who are working in other parts of the world are looking to come back where they can make a difference,” says McCann. “They feel they will be able to make a real mark” back in their homeland now that the environment is less restrictive.

But Mak warns: “Try not to hire people with ‘green cards.’ There are lots of returnees to China from the U.S., but unless you are prepared to help them resolve tax and other related issues, stay away.” He says many of these people “come in with a different mentality and don’t usually work well with pure locals.”

Pay and Benefits

Chinese workers are learning the intricacies of Western compensation packages, such as variable pay and stock options. For example, Western companies that have variable pay plans at home “will probably have them here,” says McCann.

“Differentiation for performance is not a new concept in the West, but it would have been here a few years ago,” he says. Today, he sees “no resistance to meritocracy. It works very well. People do see a correlation between performance and reward. It mirrors much of what has happened in the West.”

Benefits issues are complex, according to Mak. “First of all, that China is a low-cost country is a myth, though it is still true in the southwest regions and inland. Benefit cost as a percentage of compensation would range from 30 percent to 80 percent, depending on where you are. Some benefit contributions are required by the government as statutory.”

While salaries generally have been lower in state-owned companies, benefit packages are much better, according to Elliott. That makes it difficult to assess the cost of individual compensation because benefits may include housing, international travel and allowances for clothing and a car.

According to tradition, housing isn’t provided for locals hired locally, says Mak. But now, “Due to the generosity of foreign companies and a lack of understanding of the norm and culture, housing is expected, especially by senior locals.”

Workplace Metamorphosis

When China first opened to foreign investors, HR-related laws were geared to controlling their activities “as well as facilitating the transfer of training and technology to the local labor workforce,” according to Mak.

“We couldn’t hire directly from the market unless we were legally registered and conducting business, or in partnership with a local partner,” says Mak. “The Foreign Enterprise Services Company (FESCO) was formed to act as a ‘medium’ or government vendor to hire and refer ‘talents’ to foreign companies establishing themselves as ‘Representative Offices.’ FESCO set the rates.”

The other reason for establishing FESCO was to handle the files of local workers. According to rules at that time, foreign entities were not allowed access to these files, according to Mak.

As China eases “its rule on equity and ownership of companies, more foreign firms—having had the painful experience of partnering with JVs [joint ventures]—have resorted to forming ‘wholly owned foreign enterprises.’ As a result, they can hire directly,” he explains. But, FESCO still exists to work with new entrants, which can only set up as a Represen-tative Office, he says.

Mak believes China remains “provincialized” despite its open-door policy and that rules, regulations and practices still vary greatly from one province to another. “This has created a big challenge in terms of hiring and moving people around. Although there is a tendency for flexibility, it will not be easy to hire a person from Shanghai to work in Beijing due to the existing ‘hukou’ (residence) policy.”

But other HR professionals working in China say workers are being allowed to move from one area to another and that use of the residency policy is being relaxed. “Cities realize they no longer want to restrict people,” says Lee. “In major cities, the governments are beginning to welcome highly talented people. They are becoming more flexible,” Lee says.

Another recent change in China may help companies retain workers, Colozzi notes: Locals are now able to own property, although mortgages have been available only for the past two years. As in the United States, tax incentives encourage ownership. “For the first time, people can develop equity in something,” says Colozzi. “They may be more reluctant to jump off the horse they’re on” in favor of a new job.

In fact, he says, attitudes about job hopping have shifted in the past two or three years. “When I first got here, by [age] 27 people often had had five jobs. Salaries were inflated.” Today, “Word has spread that job hopping is not good, that it doesn’t help your career chances.”

Although in many ways China may be becoming more Western, Colozzi warns against disrespect of its unique culture. “No one has taken the time to understand the culture, to research the most basic things in their culture,” he says. “Our operating philosophy is to combine the best of local culture with the best of American culture.”

On his first trip to the country four years ago, Colozzi cultivated a network of young Chinese professionals. When he asked them: “What are the biggest mistakes companies make?” he says they responded: “‘Americans, Germans and French show us no respect ...’ I took that to heart.”

Stephenie Overman is a Chatham, N.J.-based freelance writer.

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