Focus: Human Resources
The Great Look Forward: China's HR Evolution
The future of effective human resources management in China lies beyond the challenges of recruiting, training, and retaining qualified workers
by Jill Malila
The engine of international commerce is roaring in China, yet its enormous population belies the fact that the country lacks qualified talent to meet foreign employers' demand. An often-quoted McKinsey Global Institute 2006 study notes that less than 10 percent of new Chinese university graduates—estimated at more than 4 million in 2006—have the skills required by foreign firms that operate in China.
As a result of acute talent shortages, high attrition rates, and the tremendous ease with which skilled workers can hop from one job to another, companies are struggling to attract, train, and retain the employees that they need to gain a competitive edge in human capital. Multinational corporations (MNCs) in China consistently cite this human resources (HR) challenge as their top concern.
Adopt a total rewards strategy
Maintaining a strong focus on the talent crisis means more than addressing it as many China-based firms have thus far—that is, by throwing more money at the most desirable employees and, to retain them, resorting to quick fixes such as title inflation, by which employees are often promoted beyond their skill level. Many companies pay insufficient attention to training, career development, and pay for performance. In other words, companies too often "buy" talent for the short run rather than "build" talent for the long run
Improve HR effectiveness
China's HR professionals are not always equipped to handle the complexities of China's talent marketplace, and companies need to improve the effectiveness of their HR processes, programs, and leadership. Indeed, with cutting-edge HR concepts still relatively new to China's HR managers, the need to boost HR competency is critical to business success. Chinese HR professionals must quickly learn the complexities of more strategic HR solutions, and not just the tactical implementation and execution of compensation and benefits strategies.
This improvement in HR effectiveness must also include alternative delivery of HR processes, through, for example, the use of technology, a shared-services arrangement with other functional units of the company, or an outsourcing or co-sourcing arrangement with HR service providers. Such alternative delivery arrangements often ensure higher and more consistent quality of administrative processes.
Link engagement to productivity
Given China's importance, it is not surprising to see top executives increasingly involved in decisions related to talent and HR management. The talent crisis, compounded by the shortage of qualified HR staff, has led top executives to scramble for solutions and to consider alternative delivery models for HR processes, such as shared services and outsourcing arrangements. Executives are also demanding returns on HR investments by linking HR programs—including talent management, compensation, and benefits—to improvements in productivity. FULL STORY