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Take more than one billion people. Add a centralised Government with strict rules on employment and retrenchment. Stir in a severe reduction in economic growth and you have the People's Republic of China in 2009. HRM investigates just how HR departments are coping
Talk to anyone living in any of China's growing cities and you'll hear a common theme. The pace and breadth of change is unlike anything that outsiders have ever seen. Buildings can rise or fall in a matter of weeks - businesses too. Even as the worldwide downturn takes hold, China is still growing at what any other country would consider an enviable pace.
But that doesn't mean everything is perfect. There are still many significant challenges being faced by businesses in the People's Republic. And with a total labour force of 807 million, it's not surprising that many of those challenges are people-related. HR departments are charged with finding quality staff, managing expectations and maintaining loyalty in a shaky, if still expanding, economy.
An evolving profession
Of all the fast-paced change taking place in China, it's easy to miss the continuing evolution within the HR profession itself. But the fact is HR is a markedly different profession today than it was just five years ago. Having gone from a completely administrative function, many organisations now boast high-level strategic HR departments, with HR leaders making up an important of senior decision-making teams.
Still, there are remnants of the old order still in place. Benedicte Hersen, Vice President of HR, Airbus China, says that while the situation is improving, much of the HR profession is still stuck in its way. That makes hiring good quality HR staff a sometimes challenging process.
"HR seems to be the hardest function to hire for," she says. "The kind of HR people we find on the market are more administrative."
She says Airbus, in China for the last three years, has been able to find very good director-level staff. These are most often local Chinese staff who have built careers in multinational companies with significant exposure to international business practices.
But lower level staff, including first-tier HR managers, are much harder to find.
"We look for customer-oriented; value added staff," she says. "(But) the HR community is to a large extent very administration driven."
Danielle Monaghan, HR Director for Microsoft's Research and Development unit in China, agrees that the HR profession is still evolving there, just as it is in more developed economies. "It's an emerging profession," she tells HRM. "It's now where HR in the US was 15 years ago."
For many years, it was a "very clinical" function. "It's only now really beginning to understand that HR can pull levers to really change a company's bottom line. The notion of talent management, for example, is a brand new concept in China."
Francis Tam, HR Director for Ibis Hotels in China, says there is still a long way to go - and poor-skilled HR professionals even occupy some of the highest posts. "Currently, we can see a majority of HR leaders with less professionalism are holding high level HR positions and sitting at the board table," he says. "This is something different from the West."
Recruitment blues
Finding good-quality HR staff is tough, but it's a common problem across many functions. Even as the downturn takes hold, the war for real talents in the Chinese economy continues unabated. While there is increasing unemployment at the lower end of the market, most HR experts at multinational firms say this is restricted to migrant workers and unskilled labour. Manufacturing workers have been hit particularly hard by the faltering world economy - as China's export trade thins out.
Jonathon Taylor, HR Director for Coca Cola China, says finding good professional -level talents is a constant pressure, particularly as his company continues to grow through the economic slump. "The war for talent is consistent across all industries," he says. "We're still looking for five to ten years' international experience (for senior positions) - that's the biggest derailleur."
Multinationals looking for staff with multinational experience have had to resort to creative hiring and training options. "We take chances on local talent and that's not necessarily a bad thing," Taylor says. "Coca Cola has always had a philosophy of taking chances on talent - but it has to be done in a consistent manner."
Monaghan says differentiating employment offers is one answer - but it's a very foreign concept in China. "Understanding top or potential top performers is new," she says. "Pay for performance is new as well."
She says Microsoft works to build, buy, and even borrow, high-end technology talents. "You can't just hire from the market for architecture, software development or leadership experience," she tells HRM. As well as hiring aggressively in international markets, Micrsoft makes use of its talents in other parts of the globe. Its "Marco Polo" scheme allows for 6-month secondments to the China campus, creating opportunities for knowledge sharing, cultural exchange and direct training.
China looks forward
The global downturn has pared China's rapid growth back to a mere expected 8% this year. There are still signs of a slowdown but, as Tam explains, they are different to the indicators shaking up many developed economies right now.
"The impact right now is comparatively less than other developed countries, especially in the financial and banking system," he said. "Companies are facing retrenchment, freezing headcounts and closing down regional offices."
"HR has to strategically align to these business changes."
This has created a greater divide between employees and employers, which has resulted in threats of strikes or even riots at the lower end of the market. Multinationals however say business is as close to usual as can be expected - at least as far as staff relations go.
"There has been a need for employers to undertake a more deliberate effort on communication," Taylor says. "Over the last ten years (many local staff) have only experienced significant merit increases year-on-year." That is clearly unsustainable in the current environment, so it has been up to HR to dampen expectations and introduce staff to a new reality.
Industrial relations
The role of trade unions, and even the governing party play an important part in how employers interact with their staff. Unions are common, and even small businesses often have a formal employees' representative or group. Employers are legally obliged to consult with unions whenever large-scale changes are being considered. The formulation and amendment of certain policies, retrenchments, and changes to standard working hours all require union-level talks.
The experts HRM spoke with say the recently introduced Employment Contract Law has made things particularly onerous on employers.
While strikes are technically illegal, industrial disputes do take place, particularly when those talks fail to progress. These can be resolved through mediation - a compulsory first step, - arbitration through a Government body, or in the worst case scenario, litigation through the courts.
Taylor says that's all part and parcel of dealing with HR in a rapidly changing and developing economy. While it's certainly a challenging place to practice the profession, he says he wouldn't have it any other way. "That's the modus operandi here since Day One," he said. "It's what gets us out of bed in the morning!"
Monaghan agrees wholeheartedly. She says it's been a privilege to watch the country's economy grow in recent years and to contribute at least a small part to China's development. "I feel like I'm living a piece of history," she tells HRM. "It's great to have input into a developing nation."
The challenges at a glance
Multinationals operating in mainland China face a tough year ahead. Here's a glimpse of some of the HR challenges they're dealing with:
» Good, strategic HR staff are difficult to find
» International experience is in short supply
» Tough regulations make retrenchments costly to implement
» Talents are used to automatic salary increases
» Firms are still testing the finer points of new employment legislation