April 28, 2009
Executing Growth Strategies in China:
Perspectives on People and Organization
Alison Eyring PhD
Organisation Solutions
Dr. Eyring will be teaching the module ‘Strategic Human Resource Management’ on May 22 – 24, 2009.
In good times and bad, executing strategy is all about people and organization. Nowhere is this truer than in China. Limited pools of key talent, and keen competition for it, make it hard to attract and retain the right people. When combined with highly diverse markets and in a complex and changing legislative environment, executing profitable growth strategies is difficult.
The following summarizes key learnings about the role of people and organization in executing growth strategies in China. These are based on in-depth interviews with the China country head and their most senior HR leader in 10 leading Western MNCs.
Building the Talent Pipeline
Attracting, selecting, developing, and retaining talent is key for growth in China.
Having a strong reputation as a good employer that develops its people is particularly important to attract talent. “If a company has a good name and reputation, it can attract talent. Money is important too—but less important than development,” said one HR leader.
Investing the time and resources to bring the right people into the organization and onboard them properly is important and challenging. “Due to the intensity of our interviewing process, testing used, and use of peer-level interviewing, many of our retention and development problems go away,” shared one line leader. Maintaining high standards in selection while facing significant pressure to hire caused by growth and sometimes turnover was a concern for several of the HR leaders.
Ensuring the right country leader is in place also is key to strategy execution. Two companies jump-started their growth by bringing in a country head two to three levels higher than the previous person. In both instances, the leaders had been running a much larger business than the existing China operation. Two other companies experiencing turnarounds also brought in new China heads. Of the four companies, three of the senior leaders were external hires. Many MNCs are more accustomed to grooming leaders for mature markets, but are not prepared for the leadership demands in emerging, high growth markets.
Retention also is critical and challenging; but most of these companies said turnover is not a problem or that it had improved because of focused efforts. 3M, for example, uses a dual career ladder for technical people to help retain its highly valued R&D staff. One of the companies has seen a step change in how it retains people. “Doing more with employee engagement and creating a shared vision really makes a difference to the business,” said its head of HR.
Developing local talent also is a priority. This has translated into large investments in classroom training and eLearning. Most companies have formal leadership development programs and many focus on developing the capabilities of their leaders to develop others. The companies that place a greater emphasis on building a shared organization culture also focus more on development using their leaders as talent developers and through planned movements than other companies.
Importing talent from parts of the business outside of China can play a useful role in developing local Chinese talent. Many of the leaders spoke of a desire for more local Chinese leading their China businesses; only one leader spoke of the intent to reduce foreign employees. Three of the companies export Chinese talent into their business. Western mental models of what a good leader looks like can be a barrier to this. “It’s easier for a Caucasian to look and act the way others view a ‘leader,’” said one of the HR leaders.
Managing Interfaces with the Larger Organization
The companies differed in terms of how they manage corporate or business unit interfaces outside of China. Varying degrees of business complexity, degree of globalization of business unit structures, relative autonomy of the China business, and the stage of business development in China all seemed to influence this.
For all 10 companies, China has become increasingly important to its home office. At times, this creates an overwhelming amount of attention and initiatives being driven from outside of China—particularly over the past few years. According to several of the line leaders, this attention sometimes drives activities that make it harder to maintain business focus and achieve desired results.
China country leaders often spend considerable time educating executives at the home office about China. “The home front must be managed carefully,” said one leader. “It’s important that they take a long-term view, have the right expectations and understand volatility in China.”
While managing corporate interfaces is challenging to leaders in China, involving corporate executives in communicating with Communist Party officials and meeting with key customers and partners is essential to growth. They require corporate leaders who appreciate the complexities of China. In one company, a member of the corporate leadership team was relocated to Asia to help facilitate corporate relationships.
A few of the companies have structured China to be a stand-alone country or region reporting into the home office through a strong country chair, but most have multiple, global lines of business reaching into China. This results in matrix structures that can bewilder Chinese employees. It is particularly challenging for those who report to both a local boss and another in Europe, the United States, or elsewhere in Asia/Pacific.
Educating employees about how the matrix structures work can help. In one company, employees are trained how to deal with two bosses. They also conduct three-way coaching sessions with the two bosses involved.
Conclusion
As China plays an increasingly important role in global MNCs’ portfolios, it will become essential for western MNCs to better understand and support China growth plans. HR professionals working in and with China must create tools and processes to enable their organizations to build their talent pipelines faster. HR also can support growth by helping to design and effectively manage interfaces between the China business(es) and the corporation.
About the Author: Dr. Alison Eyring is founder and CEO of Organisation Solutions, a global consultancy specializing in organization effectiveness and headquartered in Singapore. The company was established in 2000 and works with global MNCs to achieve and sustain the growth of their business, teams and leaders worldwide.
Copyright Organisation Solutions. Used by permission.
This is excerpted from an article published in HRPS’ Journal: People & Strategy (March 2008).