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Management Report

Management reports, briefs and video-clips issued by Samsung Economic Research Institute

To Become a Winner in HR War in China

To Become a Winner in HR War in China

EOM Dong-Wook

Apr. 15, 2011

Transcript

Welcome to our video program. I’m Dong-Wook Eom from the human resources research department.

As China’s economy continues to grow, so does its interest in securing and utilizing talent in the market. Although demand is soaring, the talent shortage has become severe, prompting both local and foreign-funded companies to compete with each other to get the best workers first. This is expected to continue going forward.

Today, we are going to look at how Korean companies doing business in China can attract talent.

Before we begin, let me ask you a question.

What do you think Chinese college graduates would choose? Foreign-funded firms or local ones?

The answer is the latter. Since the global financial crisis in 2008, Chinese college graduates have increasingly opted for local companies or public agencies. According to ChinaHR.com, six foreign companies including IBM, P&G and MS were positioned among the top ten companies sought after by Chinese university graduates in 2005. By 2010 however, only MS, Google, and P&G remained in the top ten. Local firms like Alibaba and Haier had replaced them.

Why the change? Chinese companies have experienced escalating status, while the working and living environment in China has vastly improved. This has led to an increasing number of workers at foreign companies moving to local companies.

On top of that, Chinese talent became increasingly worried about job security during the global financial crisis, when foreign companies cut hiring, and pursued cost reduction and restructuring. There is also a widespread consensus that Chinese are at a disadvantage compared to expatriates from corporate headquarters when it comes to promotion. To capture opportunities, local companies are proposing attractive terms to lure management and executives from foreign companies.

To survive the fierce war for talent, what should Korean companies do?

First, companies need to develop talent by themselves. Companies will reap what they sow and it is difficult to attract talent if they do not make efforts on their own.

It is thus important to establish an HR training and development system in cooperation with the Chinese government and universities. Cisco Systems, for example, has forged a partnership with the Chinese government, focusing on core talent in technology, while building ties with prominent universities and business schools.

The Intercontinental Hotel Group is in partnership with graduate schools in 10 regions in China to open special courses on hotel management so students can learn and understand the systems and processes of the hotel.

To lure Chinese talent before other companies do, you can also appeal to foreign national students in China and Chinese students studying abroad. For example, Korean companies can look for bright students among the 38,000 Chinese students in Korea and let them work in Korea for a while after graduation before moving to Chinese branches. By doing so, they can have a chance to adapt to Korea’s organizational culture and to learn the Korean language, which can in turn help them later serve as a bridge between HQ and local branches in China.

What other strategies can you pursue to attract China’s talent?

Yuko Miyata, vice president in charge of human resources for Northeast Asia at Unilever Japan Holdings, emphasized the importance of growing middle management by saying a company’s survival in emerging markets relies on securing management personnel on a constant basis. In fact, Unilever trains Chinese talent to become core management. The plan is: after university graduation, an employee is rotated every three to six months for two to three years. Five years after being promoted to manager, one becomes General Manager, before becoming an executive in his or her late 30s. By the time one enters his or her early 40s, a chance to become a chief officer arrives, and in his or her 50s, one gets to have an opportunity to be a chief officer in charge of a region.

Since Chinese employees prefer working at local branches to overseas HQ, Korean companies need to dispatch employees overseas only temporarily. When it comes to a temporary expat system, Korean companies have advantages thanks to geographic proximity to China, so they need to capture the opportunities.

Last but not least, companies need to localize their business in China, maintaining close relations with natives to build trust.

Japanese company Itoyokado opened its first store in Shanghai in 1998, and set a goal that the third store in China would be run by a Chinese manager.

Despite the long work hours typical in retail, Japanese executives stay with employees and share their expertise for the sake of localization of the company. As a result, Itoyokado has many local employees who have worked for the company for a long time. When aiming to achieve close relations with local employees, Korean companies are advised to attract bright human resources by relying on the Confucianism-based organizational culture shared by both nations, rather than appeal to them only with high salaries.

If you want to work with the best talent, you should not wait for them. You should reach for them first. If you do that, nurture talent, and put it at the center of your localization effort, you can expect success in the Chinese market.

Thank you for watching. I’m Dong-Wook Eom.

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