How Multinationals Err in China

This Article was originally published in Forbes magazine on May 24th, 2007 by Shaun Rein. in it he discusses the possible mistakes which ccould be made by multinational companies trying to make their way in China.

SHANGHAI -
"Many businessmen have long pointed to piracy problems, corruption, lack of transparency and currency convertibility issues as the main obstacles for doing business in China. My firm recently conducted interviews with senior executives of multinational corporations to understand the current business climate. The background is a series of reports suggesting that the majority of American firms with operations here expect to turn a profit in the Middle Kingdom in 2007.

What we found was surprising. Respondents indicated that the No. 1 impediment to growth in China is finding the talent they need to scale their businesses--not the typical problems cited by this nation's critics.

As China shifts from manufacturing to a service-led economy, the demand for skilled labor is
heating up. The lack of white collar workers has created a mercenary class of executives who bounce from job to job seeking wage increases of even just several hundred dollars a year. Many multinationals follow misguided human resource strategies that intensify the problems. The companies that implement the right HR strategies and focus on three key areas will be able to attract and keep the right executives needed to turn their China operations into humming profit centers.

The first pitfall that many companies run into is the glass ceiling that exists for native Chinese in many international companies. Multinationals often run their China operations by relocating people with little China experience from their home office or by hiring executives from Hong Kong and Taiwan. A large number of these expatriate executives receive outsized packages with Audis, drivers and towering $10,000 a month villas while senior Chinese workers often only make a fraction of what their foreign counterparts do.

The second problem that foreign companies face is a shift in expectations among China's workers toward compensation packages and leisure time.

Workers born after China's implementation of economic reforms and population control policies of the late 1970s share many characteristics with America's baby boomers. Unlike their parents, who experienced hardships like the Cultural Revolution, China's baby boomers have experienced 30 years of uninterrupted economic growth. They are incredibly optimistic about their career paths and are fueling China's consumer revolution.

The third problem that foreign companies face when trying to hire and retain Chinese employees goes to the core of China's labor market woes. Chinese employees need and want continuing education and training options.

China is facing a major shortage of white collar workers because the education system relies on rote memorization and testing, techniques which inadequately prepare Chinese workers for the realities of China's fast-paced business environment."

To view the entire article at its orignal location click the title of this post.

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