HR is a Source of Competitive Power in China – Or a Vulnerability

HR in China is a strategic competitive advantage for MNCs

A few weeks ago our companion site – ChineseNegotiation.com published a piece about sources of power for Westerners when negotiating in China, and the second item on the list was “HR and manpower planning”. There were a few comments and questions – while this seemed to be an important management competency to develop, it didn’t strike some people as a vital competitive advantage – particularly for Western firms.

task master and heroic worker
Laborers or Hero Managers?

Opposing Trends to HR in China and the US

In China identifying, training and retaining the right people for management positions has become a significant constraint on management and expansion. Meanwhile, management teams in the US and Europe have been shedding staff and cutting benefits as quickly as possible.

US C-level Orientation towards hiring middle managers:

  • Staff is a necessary evil. The fewer people working in the middle levels of the company, the better.
  • Workers are parasites, feeding off the hard work of heroic leaders and visionaries (a la Ayn Rand)
  • Star system. US compensation plans are meritocracies on steroids. We used to believe in the 80-20 rule, where 80% of the benefits accrued to the top 20% of personnel, but that seems socialistic by today’s standards.
  • Staff exists at pleasure of boss. Job security has become a thing of the past.
  • Workers are lucky to have any job at all.

China manager orientation towards working for an MNC

  • Working for a foreign MNC is now a risk that requires reassurance and guarantees. In Ancient China (2006) China’s best and brightest flocked to work for famous foreign brands, and they were humiliated, under-utilized and ultimately fired. Modern Chinese MBAs won’t make the same mistake.
  • MNC bosses are interlopers. The New (foreign) Boss is the same as the Old Boss. Since 2008, homegrown companies with proven business models are safer bets that offer more upside potential. This recent crop of foreign invaders will pull up stakes and leave when the going gets tough – like so many have before.
  • Community. Work is supposed to be a social activity, conducted by an extended family of workers, staff and related companies. Western managers don’t understand the difference between sophisticated knowledge workers and factory peasants.
  • What’s my path both in your company and beyond? Western firms are little more than grad schools. They are appropriate places for high-potential young leaders to go for basic training in international business, but since there is no clear path for advancement or improvement then there is no real future.
  • They are lucky to have me. Chinese managers read the papers, too. They know that competent, experienced middle managers are in high demand and short supply.

Western Advantage or Vulnerability?

Western corporations invented the in-house university, leadership development programs and employee benefits.  They also pioneered outsourcing, mass lay-offs and dehumanizing efficiency programs.  What works in the West won’t work in China.  The ability to recruit, train and retain used to be a significant competitive advantage for international firms in China — but now it seems to be working against them.

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