Wal-Mart makes headlines in China again
Wal-Mart makes headlines in China again with major expansion plans – and a warning to newcomers.
Wal-Mart is a typical “China story” for multinationals. They came to China for low-cost sourcing, and then turned their attention to the market. At first, they had to struggle with all those cultural and regulatory issues that we are always warned about. It was tough for them, but they ultimately succeeded. Now that they have their model perfected and understand the market, they are ready to roll out all over China. They are not adding a store a year – that are planning on growing by 400% in the next 5 years and adding 150,000 workers.
What does Wal-Mart identify as its No.1 challenge in China? Regulations? Corruption? Intellectual property? Marketing? Cultural barriers? No.
Wal-Mart’s sees its biggest single problem as HR. The story is the same in every large and small enterprise throughout China. Manpower has gone from being China’s strength to being its Achilles’ heel. HR managers can’t find experienced managers, supervisors or workers who understand modern methods. If they can find someone with experience that approximates their needs, the wages being demanded are too high. Training is difficult and time consuming – and often times ineffective. The days of bussing in eager peasants from the countryside for pennies a day are long gone – they are making more money back in the villages, thank you. Young graduates are a tough option, because they tend to have an inflated sense of self-worth (i.e.: won’t get their hands dirty) and prefer to work in the big city office towers.
So, what’s YOUR plan for dealing with HR? If you plan on setting up shop in China, you are going to have to deal with the HR problem sooner or later. Build a manpower plan into your business strategy early. And you can forget that tired expat dream of “hiring away a really good manager from the competition for a few renminbi more a week”. Been there, done that. The kinds of managers you’ll be able to steal are the same ones that will jump ship on you in 3 months.
If you are setting up a China operation, your options are to BUILD a strong team with training and close management, or to BUY talent that is serious about helping you meet your goals – and that means paying HK-level salaries for someone with relevant experience. In China you tend to get exactly what you pay for, so if you plan on saving money by scrimping on the payroll, you had better plan on being close by to clean up the inevitable messes.
A lot has changed in China over the last 3 years, so if you haven’t revised your business plan in a while, you would be wise to rewrite the sections on training, manpower and payroll. The situation has gotten a lot more challenging.
Posted: March 26th, 2006 under Business Entry, China General, Classic DiligenceChina.
Comments: none
Write a comment