Crouching tiger, hidden talent: talent management practices in Wenzhou, P.R. China

Transcription

1 Crouching tiger, hidden talent: talent management practices in Wenzhou, P.R. China Key words: talent management, human resource management, private sector organisations, China. Name of Authors: Dr. Crystal Zhang, Leeds Metropolitan University/ Senior Lecturer Hongkai YE,Leeds Metropolitan University/ PhD Student; Address for correspondence: Dr Crystal Zhang Leeds Business School, Leeds Metropolitan University 1

2 Abstract Attracting and retaining talents is crucial to a company s fortunes and survival in the world s fastest growing economy. Although China is the most populous country in the world, there is fierce competition for a limited pool of talent from which companies can draw from. This research investigates the talent management (TM) practice in the Chinese electrical industry, focusing on the private companies operating in Wenzhou, the birthplace of the Chinese private economy and China s manufacturing capital for electrical equipment. A case study approach with semi-structured interviews has been adopted to explore how senior managers in private enterprises in Wenzhou define talent and talent management, and the adoption of TM in their organisational culture. Our findings show that the private enterprises perceive a difference between traditional human resource management and talent management, and understand the increasing importance of talent management practice and policies in future organisational development. The term is not restricted to represent the elite alpha-employees, but instead can refer to any employee crucial to the company s operational process such as manufacturing and design. Our research has focused on a specific sector the electronics industry which is fuelling much of the economic growth of China, and also in Wenzhou, the most enterprising region of China. Thus, we propose that our findings represent an accurate snapshot of the trends in talent management in China. 2

3 Introduction The catchy War for Talent, launched by a group of McKinsey consultants in the late 90s, has captured the realisation that the knowledge economy and the rise of the mobile employee have changed the traditional landscape of human resource management (Chambers et al., 1998). Attracting talented individuals is not sufficient to maintain the competitive edge: the little loyalty from both the employer and the employee means that talent can be lost to the competition (Altman, 2008). Furthermore, free market knowledge economy and changing demographics mean that employees can move from companies and locations and that employers can poach from each other much more easily than before from an even smaller pool of talent (Aityan and Gupta, 2012;Lund et al., 2012). The expanding field of talent management (TM) is an increasing concern for companies as they realise that, in addition to attracting talented employees, the development and retention aspect is a crucial process for organisational success. Even financial crises have not dampened companies expenditures on TM, as the overwhelming majority of firms realise that the knowledge, skills and abilities of their workforce represent their competitive advantage (Beechlerand Woodward, 2009). It would therefore appear that the war for talent is set to intensify (Dobbs et al., 2012). What is talent? Wide variations exist in how the term talent is defined across differing sectors, and organisations may prefer to adopt their own interpretations rather than accepting universal or prescribed definitions. The original McKinsey report referred to talent as the best and brightest and their A-level employees who rank in top 10 to 20% of the organisation (Chambers et al., 1998). However, talent could also mean anyone who is crucial to the organisation. Thus the Chartered Institute of Personnel and Development considers talent as those individuals who can make a difference to organisational performance either through their immediate contribution or, in the longer-term, by demonstrating the highest levels of potential (CIPD, 2012). Here talent could represent either the elite or those with specific skills important to the organisation (Ulrich, 2006). In these circumstances, employees from all parts of the organisation may be identified as talent and therefore be included in the corporate talent pool (Makela et al., 2010). The development and retention of a talent pool from which the organisation can draw upon to fill crucial talent positions is a strategic issue for management (Collings and Mellahi, 2009). CIPD (2012) defines talent management as the systematic attraction, identification, 3

4 development, engagement, retention and deployment of those individuals who are of particular value to an organisation, either in view of their high potential for the future or because they are fulfilling business/operation-critical roles. In comparison to traditional human resource management, where new employees are recruited to fill in vacancies, talent management can be considered to be the proactive identification of current employees with the potential to fill key positions that may become available in the future (Hartmann et al., 2010; Makela et al., 2009). The risks here lie in the identification and sustenance of potential talent and predicting what might be required in the future (Lewis and Heckman, 2006). Hence talent management is closely linked to business strategy (Economist Intelligence Unit, 2007; Guthridge et al., 2008). Its implementation requires not only the collaboration of the human resource department and line managers, but also the support of the senior management team, as it is assumed that TM will fail if it is viewed purely as an human resource initiative (Chuai et al., 2008). Talent management in China China is often thought of as a market with near limitless potential (Ahlstrom et al., 2001). It has enjoyed nearly three decades of economic growth with an average of around 10% per annum since the reforms policy in the late 1970s (Chuai et al., 2008). The large domestic market has attracted a tremendous amount of foreign investment, such that China is now one of the world s largest recipient of direct investments from abroad (Björkman et al., 2008). With increasing competition between state-owned, private and foreign companies, the attraction and retention of talent in China has been considered to be one of the most challenging tasks in HRM practice due to the severe shortage of talent in the labour market (Scullion and Collings, 2011). It was suggested that the shortage of managerial/professional talent could hold back China s economic growth (Zhu et al., 2011). Although the automobile industry has become a pillar industry in the China economy, it is reported to be already short of 800,000 automobile professionals (Mao et al., 2009). Furthermore, the skill shortage is especially severe in the managerial sector, where it is estimated that China will need over 75,000 qualified managers in the next ten to fifteen years compared to the 5,000 currently available on labour market (Hartmann et al., 2010). The talent shortage will be a real challenge for the organisational development for Chinese companies. 44% of Chinese executives in a recent survey reported that insufficient talent was a major barrier to expansion and continued growth will increase 4

5 demands for talent at a time when multinationals are increasingly competing with local state-owned and private firms from the same talent pool (Zhu et al., 2011). Nonetheless, there are other TM issues emerging in China. Ahlstrom and colleagues (2001) described some of these: a) workers laid off from state-owned enterprises have little experience of a competitive labour environment and often exhibit poor work habit; b) Chinese labour market also placed strong constraints on labour mobility, requiring a special permit to live in certain cities to obtain housing, food, or other benefits, although these rules are starting to be relaxed; c) it is difficult to identify a pool of qualified workers; d) Chinese students are normally discouraged from expressing themselves thus affecting the training performance; and e) the appraisal system cannot be systematically implemented. More recently, Zhu and colleagues (2011) added that there was also an imbalanced economic development among regions, a lower qualification of the current human capital, an incomplete labour market system, an under-developed managerial labour market and lack of innovation in HRM. Furthermore, it would appear that Chinese companies were increasingly looking abroad to recruit talent with managerial capabilities (Zhu et al., 2011). For example, from the 1.52 million managerial employees, less than 1% had a postgraduate degree qualification and only 11.4% had bachelor degree qualification (Scullion and Collings, 2011). In response to these issues in talent, the Chinese government unveiled a new National Medium and Long-term Talent Development Plan ( ) to develop favourable policies in terms of taxation, insurance, housing, children and spouse settlement, career development, research projects, and government awards for high-calibre overseas talents who are willing to work in China (People s Daily Online, accessed 2010). In addition, this was closely followed by the rapid development of business schools for MBA/EMBA delivery and nationwide short-term executive management training programme (Scullion and Collings, 2011). Whether these programmes can increase the talent pool in China remains to be observed. The Wenzhou economy Zhejiang Province, where Wenzhou is located, played a leading role in the privatisation of enterprises since the early 1980s (Huang et al.,2008). It is considered to be the cradle of Chinese private enterprises and also the region where private enterprises have witnessed the highest growth. As a result, Zhejiang is statistically the richest province per capita in China 5

6 (Huang, 2008). Through an unusual laisser-faire government policy, the private sector in Wenzhou has flourished and became as a role model for privatisation in China (Krug and Hendrischke, 2001). The province is home to the largest and strongest nucleus of Chinese SMEs and embody the powerful manufacturing prowess which is powering the Chinese economy. As such, our study is based on the private enterprises in Wenzhou, as we believe that the emergence and implementation of a talent management strategy in the private enterprises in Wenzhou can be used as reference points for other regions in China. Similarly, the problems faced by them can also be applicable to the overall Chinese private sector. Methodology During 2010, a number of large and medium private enterprises were approached in Wenzhou, Zhejiang province, PR China. The six companies (A, B, C, D, E and F), listed in the list of China s Top 500 Private Companies, were chosen from the electronics industry. Table 1 provides a summary of the companies involved in this study, ranging from large multi-subsidiaries with more than 20,000 employees to smaller enterprise of 700 workers. Data was collected using semi-structured interviews conducted with senior managers and HR managers. All the interviews were conducted face-to-face and in Mandarin, and lasted typically 1 hour. Quotes used in this paper are translations from the interviews. Questions covered the following subjects: a. the definition of Talent and TM in Chinese private companies; b. thecurrent status of TM in Chinese private companies; c. whether TM is differentfrom HRM froma Chinese private company s point of view. - Insert Table 1 around here - Research findings Defining Talent The abilities of managers, especially from senior management, in defining talent will influence the effectiveness of implementing TM practice. Our interviews revealed interesting and differing points of view. In line with the debate about a definition for talent, our samples of six companies supported both sides of the argument, with the exception of Company D who took the holistic view and viewed talent as a high value and high performer who 6

7 possess distinctive skills and competences but talent also could be everyone when they can fit in a right position (Operations Director, Company D). Two companies (A and E) took the original McKinsey view that talent represent the elite employees (Chambers et al., 1998). Thus, talent is defined as: The elite group of human resource. They can be the kind of person who possess professional and innovation skills, and have the potential to be high value or top performer. Talent can also be someone who has already been recognised as high value or top performer elsewhere. Chinese Communist Party Secretary, Company A Importantly, both companies A and E did not consider the educational level reached or qualifications obtained as a benchmark for identifying talent. Talent can also be those who did not have a high education background. There are many entrepreneurs from Wenzhou who dropped out of school, after their times at the primary school. They should also be recognised as talent. Chinese Communist Party Secretary, Company A A more populist view of talent can be observed in companies B, C and D where anyone and everyone is a talent. If you look at it as a whole, every employee (of this company) is our talent, even the lowest manual worker. Nowadays, it is difficult to recruit a well-trained manual worker, and therefore, a well-trained manual worker also means a lot to the company. Our company will treat every employee as talent. Vice HR Director, Company B Importantly, the companies have their own criteria to define an employee as talent sometimes it depends on the job position (Companies C and F) or on the employee s work ethics (Companies A and E). Everyone can be talent (but) talents only can be called talent when they are in the suitable position. 7

8 Deputy HR Director, Company C From company s point of view, we recognise a person as a talent once his ability can used in their position. Vice General Manager, Company F Through our interviews, we find that all the companies involved in this study understand the value of their employees and that they are concerned with stimulating the potential talent of their staff to achieve maximum value. The underlying interest is to use talent management as a way to improve efficiency and productivity. Interestingly, Companies A and E evaluate talent together with work ethics: thus the company considers a talent (or potential talent) with good work ethics as a good bet for staff development and low risk of leaving the company. An employee with poor work ethics (regardless of abilities) can be disastrous to the company and is to be avoided during recruitment. Talent not only has outstanding skills but also need to have outstanding work ethics. HR Manager, Company A if a person has distinctive abilities without work ethics and personal morality, he will be a poison (liability) to the company in the future those with work ethics and personal morality but with lower abilities are like second-grade products. But we can still improve them through training Vice HR Director, Company E Defining talent management Of the six companies interviewed, 4 of them considered talent management as being largely human resource management. For example, the Chinese Communist Party Secretary of Company A identified TM as a part of HRM, while the Vice-HR Director of Company B thought that TM and HRM have similar content, but with more specific focus and plans. Moreover, the Operations Director for Company D proposed that TM can be considered to be a sort of upgrade to normal HRM or its evolution. Our findings here show that the view on TM from our sample of private enterprises in Wenzhou is in agreement with the 8

9 multinational companies operating in Beijing (Iles et al., 2009). In addition, the HR manager of Company D thinks that the use of the word Talent instead of Human resource is a compliment for employees and can motivate them at work. This statement echoes the finding from Huang and Tansley (2012) who argue that TM is simply a rhetorical obfuscation without any theoretical innovation. However, it would also appear that some companies genuinely consider TM to be a specialist area important to the organisational strategy. For example, the Vice-HR Director of Company E noted that HRM is broader while TM is more specialised especially in attracting, recruiting and retaining staff. The HR manager of Company A gave the example of their use of TM for attracting talent to Wenzhou by setting up a subsidiary company in first tier cities such as Beijing to increase awareness and prestige. As a result, advice from TM team would receive more attention than from the HRM team during decision and strategic meetings. Recently, our Company s TM has more specific plan in attracting, selecting, recruiting, retaining and developing than traditional HRM, focus on talent in key position. Vice HR Director, Company B Current status of adoption of TM All of the companies interviewed except for D and F, which are the only SMEs, have declared having a TM policy in their organisation, with the earliest adopter dating from Those with a TM policy reported that their TM strategy produced impressive results for finding and retaining staff. As Wenzhou is not a first tier city such as Beijing or Shanghai and also not even a second tier city, it has more difficulties in attracting a limited number of talents to it. Thus, all the interviewees mentioned a shortage of trained and even untrained manual workers. Indeed, as paraphrased by the HR manager of Company A, the geographical position of Wenzhou has influenced the company to find ways to attract talent. Various incentives and proactive policies have been implemented to overcome their geographic weaknesses, as illustrated by the quotes below. Because of difficulties in attracting talent, our company has set up multiple solutions for retaining talent. For example, our company will help employees solve family issues, especially for those coming from outside of Wenzhou. We have established a school for the 9

10 children of our employees and provided working opportunities for their partner so that their family can stay together. We also offer them a stake in the company through share options to improve their loyalty. Administration Director, Company B Our company has set up a research lab in Shanghai to increase awareness of our company in a first tier city. This should attract more talent to us, and improve the research and development of our products. We have also started to outsource some of the projects to other companies, as a way to use their specialist talent. Deputy HR Director, Company C Companies D and F are smaller enterprises with less than 1,000 employees each. The interviewees for both companies reported that they operate within the traditional HR management practice but are also aware of TM. They also described some personnel strategy which closely resembles parts of TM and were looking into implementing a more formal TM into their organisational culture. In the case of Company D, a newly formed joint-venture with an international company, TM is important but not an urgent item on the company s agenda, as it can not devote more resources to staff development yet. 10

11 Table 1. Profiles of companies in the Wenzhou electrical industry which participated in the study. Company Company Information Turnover Adoption of talent management Interviewees A Established in 1986 and has currently over 1200 employees. Over 2.87 billion RMB Yes. HR Manager and It is comprised of 7 subsidiary companies, 6 joint-venture companies and since 2007 A recent implementation. Party secretary over 100 members enterprises. B Established in 1984 and has currently over 14,000 employees. Sales revenue in 2005 Yes. Administration It is also one of the largest private-owned enterprises in China. was approximately Has implemented it into the Director, 12.5billion organisational culture. Vice HR Director, As a note, this company was at the and forefront of the adoption of HRM Salary& Reward practices in the 90s. Specialist C Established in 1996 and has currently over 22,000 employees. Income of 21 billion Yes Deputy HR This is one of the largest companies in the area, with modern production RMB in Has a dedicated section of talent director bases, 12 wholly invested subsidiaries, 85 member enterprises with shared management in company website. participation, over 800 partner processing enterprises, and more than 3,000 sales companies. D Established in 1981, with a strong focus on quality management, and has Turnover of 0.3 billion No. Operations about 480 employees and 102 middle and senior managers and RMB in Only HRM. Director, technicians. HR Manager, and It is now part of a joint-venture with an international company. Management representative E Established in 1985 and currently employs over 5000 staff. Over 10 billion RMB in Yes, implemented in Vice HR Director 2011 Has a dedicated section of talent and management in company website. Administration Director F Established in 1997 and has over 700 employees. Over billion RMB No. Vice-general This company is an official government supplier. in 2009 Only HRM. Manager. 10

12 Conclusion This working paper has explored TM practice thorough semi-structured interviews with the senior management of six of Wenzhou s private companies in the electronics industry. Our preliminary data reveals a snapshot of the state of talent and adoption of TM practice in China. Overall, all companies had a conceptual understanding of talent which reflects the debate in academic research. Talent was seen as an important factor for their companies growth and expansion. In most of the cases, TM was considered to be a subset of HRM, albeit a specialist area which can influence the organisational strategy. One final factor of note is that all the companies interviewed predict a future shortage in trained or untrained labour this in a country considered by the West to be full of cheap and numerous labour. In preparation for this, and also to compensate for their geographic weakness, most of the companies interviewed have already adopted a TM strategy to attract and retain their employees. Although TM in the companies interviewed is still nascent and lack a systematic approach in identifying and developing talent, our initial analysis points to the conclusion that TM will indeed become an important focus of Chinese HRM in private enterprises in the war for talent. Further research will be required to confirm this conclusion and follow its development in China. 11

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