An investigation of talent management (TM) in private electronics enterprises in Wenzhou, P.R. China

Transcription

1 An investigation of talent management (TM) in private electronics enterprises in Wenzhou, P.R. China Hongkai Ye and Crystal Zhang Leeds Metropolitan University Address for correspondence: Dr Crystal Zhang Leeds Business School, Leeds Metropolitan University Stream: Comparative and cross-cultural dimensions of HRD Submission type: Working paper 1

2 Abstract Purpose: The major purpose of this research is to explore the talent management practice in Chinese private companies in the electronics industry and to provide a broader understanding of current talent management research with emphasis on Multinational Enterprises in China. This research focuses on exploring how the senior managers define talent and talent management in Chinese private companies; whether they perceive any fundamental differences between talent management and traditional human resource management; and the current practices of adopting talent management in Chinese private companies. In addition, the impact of industry segment on the practice of talent management is examined and discussed. Design/ methodology/ approach: A case study approach with semi-structured interviews has been adopted in this research. Six Chinese private companies in the electronics industry have been selected for the case study. The interviews were conducted with senior managers and HR managers for each company in Wenzhou, P.R. China. Based on previous research, the interview questions focus on the definition of talent and talent management; the perceived differences between talent management and human resource management; why and how the organisations adopt talent management; and the different application of talent management practice in different industries in China. Findings: This research shows that there is an understanding on the increasing importance of talent management practice and policies in future organisational development. Chinese senior managers from private enterprises perceived a definite difference between talent management and human resource management. In addition, there has been diverse perception on talent, talent management from different industry. Research limitation: This study looked at a small number of companies in China. A larger sample from other industries will help build a comprehensive picture of TM in China. Originality/Value: This research enriches the research data of talent management in Chinese companies, especially, in the private sector and the electronics industry. The comparison of talent management within different industry types will provide significant meaning for the development of talent management. Key words: talent management, human resource management, private sector organisations, China. 2

3 Introduction Talent management (TM) has attracted increasing attention from academics and practitioners since a group of McKinsey consultants coined the phrase the War for Talent in 1997 (Iles et al., 2009; Collins and Mellahi, 2009). Organisations worldwide have come to realise that the knowledge, skills, and abilities of their relented employees represent a major source of their competitive advantage (Gutheridge et al., 2008; Collings and Mellahi, 2009). Indeed, even during the financial crisis, talent remained a critical agenda item focused on the highest achievers and the overwhelming majority of firms still intend to focus on top talent, with nearly half the companies planning to sustain or increase learning and development expenditures (Beechler and Woodward, 2009). Without a doubt, TM will become more important in the age of knowledge economy. Academics have responded by identifying a wide research agenda to further the theoretical and empirical development of TM as part of human resource management (Hughes and Rog, 2008; Iles et al., 2010). Definition of TM It is necessary to define talent before studying TM, because it could influence how talents are identified and how TM approaches are underpinned. The McKinsey report referred talent as the best and brightest and their A-level employees who rank in top 10 to 20% of the organisation (Beechler and Woodward, 2009). However, a high potential performer would also be those people who are defined as talent for the purpose of the organisation be it top performers, high potentials, senior managers suitable for director positions, or people suitable for critical roles in the organisation (Blass, 2007). Indeed, Ulrich (2006) defined talent as the multiplication of the 3Cs competence of the individual, commitment to the work and the company and real contribution through meaning and purpose of the work. However, it is difficult to make a specific definition for every organisation as different organisational demands would determine the different understanding of the word talent. Indeed, a Chartered Institute of Personnel and Development (CIPD) report has observed that TM requires HR professionals and their clients to understand how they define talent, who they regard as the talented and what their typical background might be (Iles et al., 2010). Talent could therefore be either the elite of the organisation, or people with specific skills important to the organisation. Talent management and human resource management Just as there is no specific definition for talent, there is also no specific description for talent management, as can be seen in the debate in the literature regarding this topic (McDonnell et al., 2010). Hartmann et al. (2010) claim that TM can be distinguished from traditional HRM by using more strategic and future-oriented, as well as to be in line with the overall corporate strategic goals. For Boddy (2008), HRM is the effective use of human resource in order to enhance organisational performance. Iles et al. (2010) propose TM as the next stage of HRM. Blass (2007) indicates most TM processes and systems fall within the domain of HRM and line management. Whereas, 3

4 it remains some difference within function and focus point. Indeed, TM is the additional management processes and opportunities that are made available to people in the organization who are considered to be talent (Blass, 2007) and the identification, development, engagement/retention and deployment of those employees who are particularly valuable to an organisation - either in view of their high potential for the future or because they are fulfilling business/operation-critical roles (Iles, 2008). A broad review of the literature on TM by Lewis and Heckman (2006) concluded that the main components of TM include strategy sustainable competitive advantage, strategy implications for talent, talent pool strategy, talent management systems and talent practices. As such, TM is very similar to strategic HRM, which is the planned pattern of human resource (i.e. workforce) and human resource management (i.e. functional) deployments and activities intended to enable the organisation to meet organisational goals and objectives (Way and Johnson, 2005). Chuai et al. (2008) mention that both TM and HRM see that placing the right people into the right roles is an important means of integrating people practices with organisational goals, including individual development. TM requires not only the buy-in of HR department and line managers (as does HRM), but also the support of the senior management team, as it is assumed that TM will fail if it is viewed purely as an HR initiative (Chuai et al., 2008). A difference of TM to strategic HRM is also in the words high potential. These suggest the future possibilities of the people in the organisation, which in turn requires a strategic thinking in human resource management and organisation. Talent pool Talent pool, as its name implies, is diverse talent in reserve. Collings and Mellahi (2009) use the term talent pool to refer to the pool of high potential and high performing employees that the organisation can draw upon to fill crucial talent positions. 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). Collings and Mellahi (2009) identify the key of strategic TM is the development of a talent pool to fill critical positions. Thus the talent pool becomes an important component of TM. It also becomes a key element to distinguish TM from traditional people management. Although vacancy-led recruitment is similar in meaning to talent pool, talent pool involves the proactive identification of employees with the potential to fill key positions that may become available in the future. The identification process of talents is the key step of establishing a talent pool, followed by the need to activate and develop the potential of talents identified (Makela et al., 2009). Colling and Mellahi (2009) also recognize that the talent pool should be focused on managing the risks and costs associated with outcomes that are difficult to predict (such as openings and vacancies). Risks include the potential mismatch between employees and skills, i.e. too few employees to meet business demands or too many employees resulting in redundancies; and the failure to retain talent, resulting 4

5 in a loss in the investment in development initiatives (Colling and Mellahi, 2009). These challenges are illustrated, and indeed exasperated, by the volatile nature of the global economic climate in the modern age. 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 eta l., 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 paltry 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 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 et al (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; 5) the appraisal system cannot be systematically implemented. More recently, Zhu et al (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). 5

6 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). This was closely followed by the rapid development of business school and MBA/EMBA delivery and nationwide short-term executive management training programme (Scullion and Collings, 2011). Research This section outlines the methodology adopted and first overview of the findings from an initial Wenzhou-based pilot study carried out during The objectives of the research were to understand the definition of talent and talent management and its relevance to China in a small sample of large and medium private Chinese companies in Wenzhou, Zhejiang province. These companies were chosen on the basis that they are likely to be more advanced in their thinking and approach to human resource management and to the implementation of a talent management strategy. Historically, the private sector in Wenzhou has served as a role model for privatisation in China (Krug and Hendrischke, 2001), and thus our intention is that this project would lead to a better understanding of the role of TM for Chinese private sector as a whole. Research method During 2010, a number of large and medium private enterprises were approached in Wenzhou, Zhejiang province, PR China. Zhejiang Province played a leading role in the privatisation of enterprises since the early 1980s (Huang et al. 2008) when the Wenzhou Model was first propagated as a model for privatisation (Krug and Hendrischke). The six companies (A, B, C, D, E and F) were chosen from the electronics industry, and were listed in the list of China s Top 500 private companies. 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, with a typical duration of about 1 hour. Questions covered the following subjects to elicit detailed information on: a. the definition of Talent and TM in Chinese private companies; b. whether TM is different from HRM, from a Chinese private company s point of view; c. the current status of TM in Chinese private companies. Recorded interviews were translated to English during the analysis process. Overview of Research Findings a. Defining Talent 6

7 Defining the talent can provide an orientation for TM practice. The abilities of managers, especially from senior management, in defining talent will influence effectiveness during operating TM practice. Interesting and dynamic points of view were revealed in our interviews. 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 1 company (D) who took the holistic view and viewed talent as a high value and high performer who possess distinctive skills and competences but talent also could be everyone when they can fit in a right position. 2 companies (A and E) viewed talent as the elite group of human resource. They can be the kind of person who possesses professional and innovation skills, and have the potential to be high value or top performer. They also can be someone who has already been recognised high value or top performer elsewhere. Company A Furthermore, both companies did not use 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. Company A In agreement with the other side of the debate, the remaining 3 companies (B, C, and F) claim that 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. Company B Caveats to the definition of talent were also added, as some companies believe that job position and morale an important aspect to be considered. Everyone can be talent (but) Talents only can be called talent when they are in the suitable position. Company C Talent not only has outstanding skills but also need to have occupational morale. Company E 7

8 All of the above descriptions of talent show that every company should cherish every employee. Furthermore, they should precisely deploy their employees in order to stimulate their potential talent to achieve maximum value. This point emphasises the importance of implementing TM practice in throughout the organisation in order to improve efficiency and productivity. The comment from Company E about considering morale is worth noting - evaluating the morale of talents may be useful so as to avoid high turnover during implementation of TM strategy and improved deployment. b. Defining TM 4 companies interviewed broadly considered TM as part of human resource management. For example, Company A identified TM as a part of HRM, while Company B said that TM and HRM have similar content. Moreover, Company D proposed that TM can be considered to be a sort of upgrade to normal HRM or its evolution. However, it would also appear that TM was considered to be a specialist area important to the organisational strategy. For example, Company E pointed out that HRM is broader and TM is more specialised especially in attracting, recruiting and retaining staff. 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 would receive more attention than from HRM 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. Company B These interview data about the similarities of TM with HRM are in agreement with data from multinational companies operating in Beijing (Iles et al., 2009). c. Current status of adoption of TM All of the companies interviewed except for E have declared having a TM policy in their organisation, with the earliest adopter from Company E, the only one without a specific TM strategy, admitted discussing the possibility of TM in their agenda, but without did not go through its implementation. All the companies with TM reported to have achieved impressive results from their TM strategy. The challenge of talent shortage was considered to be a crucial problem in all companies interviewed. More specifically, they mentioned a shortage of trained and even untrained manual workers. As Wenzhou is not a first tier city such as Beijing or Shanghai, and not even a second tier city, it has more difficulties in attracting a limited number of talent to it. Indeed, as paraphrased by Company B, the geographical position of Wenzhou has influenced the company to attract talent. 8

9 These are some of the examples of the companies in implementing a TM strategy to overcome their geographic weaknesses. Because of difficulties in attracting talent, our company has set up multiple solutions for retaining talent. For example, our company will help employees to solve family issues, especially for those coming from outside of Wenzhou. We have established a school for the 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. 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. Company C Conclusion The paper has explored TM practice thorough semi-structured interviews with the senior management of six of Wenzhou s private companies in the electronics industry. The 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. References Ahlstrom D, Bruton GD and Chan ES. (2001). Human resource management by foreign firms in China: Solving the human resource quandary of managing host country 9

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