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Finders Keepers?
How to Find, Motivate, and Keep Good Staff
“There are 1.3 billion people in China. If I can’t find the right people, it’s my fault.”
Nicolas Wong, President Asia Givaudan The 50 country managers of German affiliates we interviewed in China regarded human resource management as the most critical success factor for good and sustainable operations in China, gener- ally a combination of German and U.S. practices - adapted to the actual local needs. It was generally agreed that without this flexibility, there would be no future in such a dynamic environment.
Important Success Factor
Human resources may be important in the West- ern business world but even more so in China.
Compared to Western markets, qualified human resources stand out above anything else: they are scarce. Even in segments where low skilled manual work and labour-intensive production are predominant, well-educated local staff is required to take over managerial responsibilities, and fill roles in more sophisticated business processes such as technical development or even the build- up of marketing and sales forces. Accordingly, skilled labour is difficult to attract, difficult to re- tain and even more challenging to motivate. This makes investing in people the key operational success factor for doing business in China.
Successful companies have understood this in- creased need for skilled labour and have started to build-up local human resources including both local staff and expatriates with local expertise.
Not surprisingly, issues related to human re- sources are important for almost all companies we surveyed. Companies have to find the right mix of incentives, training, development opportunities, benefits, and corporate culture in order to find, retain, and motivate their staff.
Possible Remedies
Managing the challenge of human resources in China seems overwhelming - there is certainly no one-size-fits-all solution. However certain HR- activities are more suitable than others to im- prove employee attraction, retention, and perfor- mance rates. Some of the most successful and widely applicable measures are explained below
in the form of case studies. In brief, they include:
Attracting Talent
<Co-operation with academic and educa- tional institutions to attract qualified em- ployees as well as to provide development opportunities for staff.
<Global career development plans, including professional training, staff exchanges to other global operations, and language training as an effective means for motivation and retention.
Retaining Talent
<Create a company culture that Chinese em- ployees enjoy. The corporate culture and the work environment is very important; for many work “is more than just a job”, it is an important part of their lives.
<Employ managerial staff who understand both Chinese and Western mentality, ide- ally Westerners with Chinese language skills or Chinese who have some educational or work experience in the West.
Motivating Talent
Bonuses and other incentive plans are an ef- fective way of motivating staff and in some cases retaining them.
Case Study Freudenberg: Attracting Talent In 1960, Freudenberg entered Asia via Japan, expanding into the rest of Asia in co-operation with two Japanese partners. Since then, Freudenberg China has grown to an impressive Euro 50m business that employs over 1,000 people all over the country, with production activities in Suzhou, Wuxi, and Changchun.
In order to identify and retain high potential em- ployees in China, Freudenberg started a close co- operation with Beijing’s Tsinghua University.
They set up the “Freudenberg Scholarship Pro- gram” there almost ten years ago, which now en- joys an outstanding reputation. Freudenberg se- lect four exceptional students out of more than 250 applicants every year who are then trans- ferred to Europe for a period of up to two years to receive extensive training and excellent devel- opment opportunities. Upon their return to
Lutz Kaufmann Herbert-Quandt- Stiftungslehrstuhl WHU Guest Lecturer:
CEIBS Shanghai
Dirk Panhans Consultant McKinsey & Co Frankfurt
Boney Poovan Consultant McKinsey & Co Munich
Benedikt Sobotka Boston Consulting Group, Munich
Main Topic | Human Resources | HR Management
BusinessForum China 2|06 25
China, they move into high-potential positions in the middle management of Freudenberg China, well equipped to advance into positions of responsibility. Over the course of the two years training in the company’s international offices, the aim is to build long lasting friendships and networks with other international Freudenberg employees to nurture a strong feeling of com- pany loyalty. This program has helped the com- pany identify and train outstanding local staff and to grow without incurring high costs for cross border administration and management.
Case Study Rittal: Retaining Talent
Rittal expanded into China in August 1996 with the foundation of Rittal Electro-Mechanical Technology (Shanghai) Co. Ltd. as a represen- tative office. With a staff of 260 Chinese and two German managers, Rittal runs on a very thin
“Expatriate-to-Local Staff-Ratio” and has been able to fill most middle management positions with local staff. How has the company been able to retain their valuable human capital? Among other things, corporate culture plays a key role.
Chinese employees are involved in decision- making processes and are given responsibility very early in their career. This approach seems counter-intuitive in a society that is commonly referred to as being hierarchical, but the oppo- site is true. As Bettina Schön, the Managing Di- rector explained to us, her language and cultural skills have enabled her to build trust and even friendships with local employees: “All our key local managers speak at least English or German, but the common language among all of us is Chinese. Of course, we offer excellent develop- ment opportunity, but in addition, our Chinese employees cherish the work environment where they can share even personal issues with their management and spend their free time with us as their colleagues. In many ways, it is a family- like atmosphere.”
The ability of German management to build personal relationships with their staff has kept motivation high and attrition rates low. Rittal created a professional, creative and ambitious team, well equipped for future business
challenges. In 2005 alone, Rittal employed an- other 160 FTEs (full-time equivalents), which represents an increase of more than 60 percent.
Case Study ZF Sachs: Motivating Talent The general manager of the first ZF Sachs affili- ate in China is Chinese born but holds a doc- toral degree in engineering from a German university. He was able to successfully fuse German and Chinese business culture into a strong organisation. This principle of employ- ing people who have worked or trained in China and the West in strategic positions has also been implemented to great effect in several other operations of ZF Sachs and ZF in China.
With more and more foreign firms rushing into the market, willing to pay a premium for quali- fied local staff with experience in working for in- ternational companies, competition for good people has been fierce in the automotive industry.
ZF Sachs realised this challenge and introduced a number of measures to counterbalance it. As well as extensive training and coaching, finan- cial incentives have proven to be an effective means of employee motivation and retention.
Performance-based salary was introduced for top management down to the line workers several years ago and a yearly bonus is awarded accord- ing to the company’s performance. In successful years, even blue-collar workers could earn a 50 percent premium on their annual salaries. In addition, company cars are being awarded to the
“best employees of the year”, a major incentive for the Chinese staff. In order to motivate and retain high potentials, the company negotiates individual compensation packages, reflecting the employee’s “market value” and a “retention premium”. In many cases, a lump sum bonus is paid at the “critical time point” when the em- ployees start to make essential contributions to the company after the initial training period. The bonus has to be returned if the employee decides to leave the company early, creating an effective negative incentive against staff poaching. But this form of motivation comes at a price: in some years, 6-10 percent of the company’s annual profit were given to the employees in form of a vari- able salary and bonuses. <
P R O F I L E
China Champions - A Management Handbook What other methods did the Champions use and which programmes did they initiate? In our book, China Champions, we present a number of examples of companies that have “done things right”, developing and adopting effective practices for operating in China. For more information on China Champions - please refer to www.china.ahk.de/gic/publications.
C O N T A C T
If you would like to order a copy of this is book, please contact:
Emma Schumacher-Voelker | Publication Service | German Industry & Commerce Shanghai (GIC) Tel: +86-21-5081 2266*1676 | Email: schumacher.emma@sh.china.ahk.de
Main Topic | Human Resources | HR Management
