Some have called the current time period the Asian Century in recognition of China's growing position in world matters. The continent has achieved significant economic growth since its emergence into the modern era.
With its 1.3 billion people accounting for 34 percent of Asia's population, China is emerging as a global powerhouse, no longer limited by its reputation as the factory of the world. Indeed, China's 12th and current five-year plan (2011-2015) highlights technology, energy, health care and inclusive growth as the government's focal areas for the social and economic development of the nation. Further, with its trading partners in the traditional advanced markets such as the U.S. and Europe still reeling from the global financial crisis and possibly on the precipice of another, China is looking inward to its own consumption potential to fuel future growth.
Multinational corporations (MNCs) look to the East with interest. In a market more than three times the size of the U.S., the profit potential from claiming just a small fraction of market share is seductive, and many global brands are setting up shop to try their hand. From retailers such as Wal-Mart, Carrefour and IKEA, to food franchises such as KFC, McDonald's and Coca-Cola, to technology giants including Microsoft, Google and Yahoo!, and pharmaceutical companies such as Novartis, GSK and Roche, everyone wants a piece of the action.
Growing a cross-border business requires local operations and employees in these markets. While the labor supply might seem endless, in practice, significant shortages of critical skills characterize the emerging markets. China is hamstrung by a severely aging demographic and an education system that has not produced the quantity of quality graduates required to meet business needs. MNCs have responded in part by expatriating critical skills into China, but this is not a sustainable growth strategy, and local talent development remains key to meet future needs.
With labor supply and demand equilibrium so misaligned, talent management is gaining elevated importance. MNCs are importing their global best practices to manage and develop people to accelerate the learning path and tap into the potential of Chinese human capital. However, MNCs may find that not all talent management best practices translate well from West to East, and some may produce the opposite of the intended effect. There are five talent practices talent managers should localize before implementing.
1. Open communication:
Westerners' natural communication style is relatively open and direct. Americans are likely to make their thoughts known, even if they are tempered by tactful or even colorful expressions, rather than suppress them. This is not how Chinese children learn to communicate, so that is not what peers can expect from their Chinese co-workers.
Confucianism, the doctrine for social and political life developed by Chinese philosopher Confucius, is a strong and pervasive influence on Chinese culture. Amongst Confucian values are order, harmony, loyalty, obedience and compassion. As a collectivist culture, the Chinese place community harmony ahead of personal aspirations, so communication that offends group harmony is frowned upon. As a result, Chinese employees prefer to use indirect communication, subtly implying rather than aggressively or explicitly stating their case.
The historical evolution of the Chinese culture also values keeping one's cards close to the chest. It is seen as unwise to be too blunt, to the point or too revealing with information because it could leave one exposed and potentially compromised. Being too revealing also can lead to social judgment or ridicule that may be personally or professionally damaging. Western managers need to temper their drive to state matters bluntly and move too quickly to a solution. The Chinese respect a considered approach, broad consultation within teams and the socializing of ideas and initiatives before charging ahead.
2. Performance feedback:
How can work performance be improved in the absence of feedback on what is currently ineffective? This assumption that performance feedback drives performance improvement meets with surprising resistance in China. Indeed, saving face - mian zi - to protect their own or a co-worker's self-esteem and public dignity is more important to Chinese employees than task or behavioral improvement.
Negative feedback from a manager can instantly result in a loss of face, and if aired publicly among colleagues, especially in the form of sarcasm, criticism or a challenge, will have a damaging effect on personal and professional status. The desire not to offend employees can lead to performance feedback that undermines performance improvement - such as giving favorable performance ratings or feedback, even in the face of poor performance. Or, managers may avoid providing feedback altogether. Expat managers need to be cognizant that saving face is crucial for Chinese employees, so providing feedback in a private, supportive way that is not too critical is necessary.
3. Employee empowerment:
Western best practices aim to enhance employee empowerment wherever possible, devolve decision making to align with functional responsibility and encourage contribution to innovation. Not in China, at least not yet. MNC expatriates likely will have many stories about their failure to instill empowerment into their Chinese workforce. Again, this comes from Chinese cultural roots.
It is only recently that Chinese society has emerged from its most paternalistic communist practices. As recently as 30 years ago, most Chinese lived in closed communities - danwei - run by state-owned enterprises that coordinated every aspect of life, including housing, work, schools, transport and all community services. Individuals subjugated their personal responsibility for these facets of life and obediently served their danwei community as required by leaders who held a tight rein on all activities. An "iron rice bowl" culture resulted, in which employees looked to their superiors to make every decision in return for their security and physical well-being.
Although China is modernizing rapidly and the danwei have been deconstructed, the paternalistic mindset still prevails among many employees, who see it neither as their right nor responsibility to take the level of ownership for work or outcomes consistent with an empowered workforce. MNCs in particular are aiming to change this, but patience and perseverance are necessary.
4. Recognizing high performers:
The collectivist ethos is to put the interests of the group above those of the individual. Those seem to elevate themselves above the group are denounced for inciting disharmony. This communal interest is another of the foundations of Confucianism and is captured in his writings, specifically in the Doctrine of the Mean. This doctrine holds that in the interests of both self-protection and maintaining group harmony, one must avoid extremes - zhong yong - such as taking a strong position on an issue or standing out from the crowd.
The Western ideal of performance excellence as it relates to individuals is therefore out of kilter with this doctrine. The mean is the average, and the closer to average an employee can be, the better that individual will reflect this value. Western managers may be surprised by the reaction they get to overt praise and recognition of one individual in a team. That team member's peers are likely to see him or her as selfish and even a traitor to the group, and he or she may be ostracized. Similarly, rather than accepting the accolades and feeling a sense of achievement, this high performer may seem embarrassed and self-conscious. Some employees even purposely slow their productivity or begin to underperform to regain acceptance. This does not mean the Chinese do not want praise and recognition, but how it is delivered is critical, as is recognition of the group's contribution.
5. Rules of engagement:
One of the most powerful aspects of Chinese culture is the importance placed on relationships. Guan xi is the term used to describe deep personal relationships developed throughout Chinese society and especially in business dealings, and is notable for its defining hallmarks: being personal, reciprocal and long term.
Guan xi relationships are always personal; they are between individuals, not organizations. Each party to the relationship develops a deep understanding of the others' personal background, interests and needs and, over time, takes steps to provide personal favors in line with these. Favors can be small or large, but benefit the individual or his or her family. Examples could be anything from a small gift of a favorite pen through invoking favoritism or nepotism in securing a coveted job for a family member.
Essential to the health of a guan xi relationship is balance between both parties. Once a favor has been done, the recipient is indebted until another is returned. The reciprocal nature of guan xi works like a balance sheet. The third element is that a guan xi relationship is built to last and usually endures over many years or decades. In this regard, it differs from Western business relationships, which may exist for a specific purpose or because the parties hold certain organizational roles.
A typical Western criticism of guan xi is the subjective bias it can place on what would otherwise be objective business dealings. At the extreme, guan xi can result in abuse of power and other forms of corruption. However, Western leaders in MNCs must appreciate the ingrained nature of guan xi in Chinese society and understand how to work effectively and ethically within it.
Implementing global practices without considering the unique challenges and business environment in China has led many MNCs to suboptimal outcomes. While language is important, a thorough understanding of the culture and values of Chinese society are even more so.
Preparing expatriates to facilitate their personal and professional integration in China is a must. What many Western leaders have developed in their leadership toolkit to increase employees' motivation and productivity may meet with disappointing results without the appropriate adaptation to the Chinese market.
Glocalization recognizes that neither markets nor people are homogenous. While MNCs develop sophisticated global business strategies, their successful implementation requires a thorough understanding of local environments. Effective talent management requires an empathetic understanding of the unique traits and backgrounds of the workforce to release its full potential.
By Sylvia Vorhauser-Smith senior vice president of research for PageUp People
