DiligenceChina

MNCs and China’s Evolving HR Dilemma

China’s ongoing HR dilemma is one problem I have had a hard time explaining. Since multinational corporations started arriving in China en masse almost 20 years ago, the “China HR Problem” has been the fly in the ointment for top managers and operational planners. Every year in every survey of every CEO, ‘finding and retaining effective local managers’ consistently ranks at or near the top of ongoing crisis and enterprise-threatening challenges.

But HR really shouldn’t be particularly tricky for the MNC machine – particularly in the China market. MNCs are good at this. This is supposed to be their main skill – organizing human capital. Why have they persistently been unable to master the challenge of HR in China? Chinese people are smart, they’re well educated, they’re motivated and they’re ambitious. Why has this issue been such a persistently insurmountably problem for MNCs?

China HR: One phrase – Many problems.

It hasn’t been. Or at least, it hasn’t been one problem. It’s been a series of separate, discrete challenges that MNCs have been systematically and methodically tackling for almost two decades. And we are rapidly approaching a time when the notorious “China HR Problem” fades away as a threat to profitability and expansion in the Mainland economy. Within a few years, the HR situation in China will become just another business headache — like sales and accounting.

The challenges are real – but not unique

Chinese grads lack experience – but so do most US grads. The old-school managers from State Owned Enterprises were useless in modern MNCs – but that hasn’t been an issue for nearly 10 years. Chinese workers have different skills and different limitations than western workers. Chinese managers can’t solve problems or think independently – but so what? That shouldn’t be more than a minor blip on the screen for even a moderately effective MNC management team. Why have the recruitment, selection and train & retain issues been such a tough nut for international HR managers to crack?

The answer is simple. Difficult, but simple.

MNCs have been solving the HR problem in China for the last 15 years. Or more accurately, MNCs have been solving dozens of HR problems. They have been confronting and overcoming a series of bottlenecks since they started engaging China in the 1980s, and the process has been largely successful. We keep using the same terminology and vocabulary to talk about “THE China HR Problem” that we overlook the fact that every year we are really referring to a different category of job function.

In the 1980s and 90s the challenge was to train engineers, technicians and QC staff on the factory floor – and basic management functions in the back office. Remember that Motorola University was set up by the company in 1988 to address the skills-gap of the early wave of management recruits.

After we learned to build stuff we had to figure out how to move it around. The Chinese government was great at building roads, bridges, ports, etc – while western brass were pulling their hair out trying to find and train logistics and distribution managers. Throughout the 1990s there was a shortage of qualified distribution & operations people, and the business press accurately reported that this was the bottleneck threatening MNC success in China.

By 2002, however, all the Chundits could talk about was the lack of marketing people and the impossibility of localizing western brands for this market. It seemed like ‘mission impossible’, and Chinese returnees were being buried under wheelbarrows of cash and perks. Within a few years the international brands had adapted to local tastes and educated the Chinese consumer market to the beneficial affects of Coke, iPods, Scandinavian design and the glory that is Starbucks.

Around 2004 MNCs were worried about counting all the money they were pulling in, and CFOs, accountants and finance pros were in short supply – and once again the websites and white papers bemoaned the impossibility of China’s HR challenge. Chinese students switched their major to accounting and international certification shops started churning out grads in force.

All the while, MNCs were expanding — and soon sales & customer service personnel were in short supply. By 2005, and sales trainers, team-builders, and how-to-sell-for-export books started doing big business.

Now the Shanghai Daily reports that HR managers are in such short supply that they are earning more than their counterparts in the west.

We use the same terminology and refer to “the HR problem” as though it’s a single, undifferentiated issue. In fact, it’s been a rolling bottleneck. Every time one problem gets solved, another pops up – but it’s always further up the corporate ladder.

Today’s problem is how to wish for more wishes. We’re almost done. Senior HR managers sit near the top of the food chain in the modern MNC machine. It’s like the wizard learning to wish for new wishes.

And now that we’re within spitting distance of solving THAT problem, the real fun begins.

Because just like Mickey’s Magician, multinationals in China are learning how to create a never-ending stream of perpetually self-replicating machines. And that’s when we start sowing the seeds of the next wave of creative destruction – and usher in a new generation of Chinese enterprise that may actually make good on the promise of the truly International Chinese Organization.