Twenty years ago only a handful of foreign companies were established in China. At that time multinational companies (MNCs) filled their senior ranks with expatriates, but over the course of the 1990s, localization gathered pace, creating demand for indigenous Chinese leadership. As various industry sectors opened up, a flood of foreign companies came in. And the war for talent began.
Back at home, MNCs tend to hire from within their industry. But in China, companies desperate for talent will target executives in different sectors. This stems from the fact that many key sectors are new to China.
Retail, finance and luxury goods are some of the more recent arrivals and there are simply are no seasoned professionals available. A company’s only recourse is to recruit from other sectors — particularly consumer goods — a mature sector by China’s standards, with some 20 years of history.
Complicating things for China’s human resources departments anxious to hire and retain talent is the ambitious nature of China’s workforce. Top Chinese talents take career development very seriously and are acutely conscious about peer rivalry and status. Aside from competitive compensation, job titles and scope of responsibility are tremendously important symbols – and top talent is subjected to a never-ending stream of calls from corporate recruiters.
The lack of mature professionals in many sectors, the flood of companies entering China, the need of companies to hire and retain talent and the ambitions of top Chinese talent are all factors that contribute to the battlefield promotion phenomenon. Compared to their peers in mature markets, Chinese executives rise through the ranks much faster, in terms of both title and job scope. They spend shorter periods in a given position than their counterparts overseas before moving up, either with their firm or outside it.
Ambiguity is the norm
While these executives have less time in market and are arguably less experienced than their western counterparts, they have nonetheless earned their stripes. They have also developed different skills, owing to China’s very different and dynamic market. China executives, for example, operate in a more ambiguous market that is characterized by inconsistent infrastructure and consumer data points.
It takes an innovative leader to assimilate significant regional differences in terms of products, pricing, people management, distribution and manufacturing. Such executives are highly effective, but from a Western point of view they may seem unpolished. These rough diamonds are the vanguard of China’s emerging executive talent pool.
The challenge for an MNC is to recognize these individuals and then polish them. To return to the military analogy, such executives are like officers who have not attended a military academy but who have been promoted based purely on their battlefield performance.
On the other hand, battlefield promotions can also lead to problems, as companies eager to attract and retain talent promote staff beyond their level of competence. Executives who have risen too fast simply may not have the experience to lead large teams in a challenging market, thus jeopardizing their career and their company’s bottom-line. What’s more, such promotions can stoke internal rivalries: If one executive gets promoted others will notice and begin looking for their promotion.
Defining career path is the key
It is important for MNCs, particularly those contemplating an entry into China, to be aware of the battlefield promotion phenomenon and to develop the appropriate human resources strategy to deal with it.
First and foremost, over-promotion is not guaranteed to improve retention – at best it is a quick fix to placate the ambitions of a top talent.
Instead, companies should have clear long-term career paths for their top talent – often, top talent departs because a career path has not been made clear to them.
Talent development and retention is often more delicate than simply changing titles: Sandrine Zerbib, President, Greater China for Adidas, says that those who receive “over-promotions” often are individuals who have mastered hard skills rather than soft skills. Because soft skills take time, experience and maturity to acquire, it is very important that companies identify top talent at an early stage, analyze what soft skills they are lacking and help them to develop those skills.
One well-tested way to help top talent develop is to rotate executives through headquarters for an extended period of six months to a few years.
To make these rotations even more effective, Zerbib suggests giving top talent responsibility for a specific project that requires skills slightly beyond that which they currently have and ensuring they have a good mentor throughout the project’s course.
A career re-entry point into the China market should be specified even before the executive departs – it is difficult to overstate how essential a clear career path is for Chinese talent.
To retain top talent in the face of ever-competitive titles and ever-bigger pay packages, it is critical that companies stay rational and outline clear career paths for their top talent.
Leaders themselves should recognize the skills needed for career progression and resist the urge to constantly trade their way up the career ladder, a practice that could ultimately jeopardize their career. All wars end sooner or later, even wars for talent.