IT’S PROPHETIC THAT CHINA, in its own language, means the ‘Middle Kingdom’. A flight East, West or South from Beijing to LA, London or Melbourne, respectively, is 10 hours, give or take. Head quarters for the Asia Pacific region are moving north, away from Hong Kong, Singapore and Sydney, to Shanghai. And in 2016, the OECD predicts that the largest economy will shift from the West, that is, the USA, to the middle – China. “Middle?” you say. Yes, search ‘map of the world’ using Chinese characters (世界地图) and you’ll get the Chinese perspective – Europe to the left, the USA to the right, and China smack-bang in the middle.
Today, of the 21 member economies, 13 are within Asia.
This shift to China hasn’t come as a surprise. In 1989 Australian Prime Minister Bob Hawke called for more effective economic cooperation across the Pacific Rim region, with the first APEC Economic Leaders’ Meeting held in 1993. Today, of the 21 member economies, 13 are within Asia. It’s a poorly kept secret that Hawke and his government were most interested in wooing China as a trade partner. But perhaps the most obvious announcement that China is the ‘new black’ was the October 2012 white paper, titled ‘Australia in the Asian Century’, which contained 348 references to China within its 320 pages. India only appeared 269 times, Japan 218, and Singapore 70.
China’s Century; HR’s Challenge
So this is China’s century. That much is clear. For neighbouring economies, their dollar, dong, baht, ringgit, and yen are all likely to benefit. European countries will realign their exports towards China, and so will the Americas, namely Brazil. Other economies will also benefit as their main exports increase to China. These include Iran, South Korea and Saudi Arabia.
So if ‘energy flows where attention goes’, managing this new attention is likely to become a challenge for HR, as China evolves from a spoke in the economic wheel to become the hub. HR, it’s time to prepare for the global shift to The Middle.
Localisation of foreign businesses is no longer a long term strategy, but a short term goal, with many top jobs, post Global Financial Crisis, going to locals. While this trend has freed up tight budgets it has also increased the weight of responsibility on Chinese leaders’ shoulders and understandably this has challenged the relatively green local leaders. In a 2011 Korn/Ferry Leadership and Thinking Style assessment it was found that most Chinese C-suite leaders were rated very low for Social Style and low for Participative Style – two leadership qualities Korn/Ferry believes are important for matured global leaders. Referring to the research, Jack Lim, Managing Director of Korn/Ferry’s Leadership & Talent Consulting division in China, said that Chinese are competent in terms of task and intellect, but are “weaker with communication and social leadership qualities in comparison to Western counterparts.” As a consequence, Lim believes that on the job training and coaching will become more important to bridge the gaps.
In a 2011 Korn/Ferry Leadership and Thinking Style assessment it was found that most Chinese C-suite leaders were rated very low for Social Style and low for Participative Style.
Australian Anthony Aucutt of IPS Group agrees that a gap exists, and needs to be filled if China is to take the reins of the leading global economy. Aucutt is both a recruitment and China old-hand. He first came to China in 1991, and has been in recruitment in China for the past 14 years. He believes that China’s new role as an economic leader will create new roles for its citizens. In particular Aucutt believe finance, banking and insurance, alongside retail, hospitality, e-commerce and life science will be big recruiters. But there will be teething problems.
“Chinese business leaders will need to improve their strategic approach, particularly long term planning models. This also means that they [Chinese leaders] need to allow their management teams to share in ownership of decision-making for their business units, and encourage autonomous thinking and planning. However, currently the status quo is to rely on what the boss decides, or in some cases, orders,” says Aucutt, “It’s very command and control.”
Failure to Culture Shift
Steven Wood, Huawei’s former Global VP of Human Resources highlights the negative consequences of this command and control management culture prevalent in China today. Wood says, “In the selection processes for openings [at Huawei], all selections are made behind closed doors, versus an open selection process.”
…compared to Western competitors, such as Ericsson or Cisco, Huawei’s turnover is three to five times for foreign employees working internationally.
He highlights that this posses a significant problem for the 34,000 non-Chinese employees who are used to an open selection policy. Wood adds that there are similar problems in “succession planning, performance management, benefits, employee relations, leadership development, learning and other areas”. As a consequence of a closed and somewhat antiquated HR system he believes that compared to Western competitors, such as Ericsson or Cisco, Huawei’s turnover is three to five times for foreign employees working internationally. Such poor statistics are bound to hamper China’s rise, since much of China’s future economy will be dependent on expanding globally.
Need for stronger leaders
Wood’s personal experience is reflected by research carried out by Great Place to Work® in their ‘2012 Best Companies to Work for’ report. Thirty-two companies based in Beijing, Chengdu Guangzhou, Shanghai, Dalian, Hong Kong and Taipei, and 60,000 employees were survey to generate the Greater China data. Compared to the workplaces in the rest of Asia, Latin America, Europe and North America, the Greater China employees rated their workplaces poorest in relation to credibility, respect, and fairness. North American leaders were consistently on top across all three categories, even achieving 13 percentage points higher than Greater China, in terms of ‘respect’.
These findings come at a bad time for China’s large companies and their ambitions of global expansion. In October 2012 the US House of Representatives’ Intelligence Committee stated that Huaiwei and ZTE posed a threat to national security and should be banned from the US. Both firms confronted the statements, with ZTE going as far as saying that it “profoundly disagrees” with the claim that it is controlled by the Chinese government. Nevertheless, whether real of not, there is a real fear in the US. Adding poor management and low engagement to the list of reasons to boycott working for China’s large firms is not going to help Chinese firms’ endeavour for a global presence.
Solution? Start with four steps
Politics aside, there are steps that HR can take to improve the ability and consequent brand of China’s corporate leaders. Step one is acknowledging that the existing management culture can be improved. The term ‘Best Practice’ is not limited to the Western vocabulary. The act of continuous improved, known as Kaizen, was coined by the Japanese, and Singapore and Hong Kong rank number one and two in terms of ease of doing business, according to the World Bank. So there’s no reason why China can’t become a world leader, with respect to business best practice. But it starts with self awareness.
Singapore and Hong Kong rank number one and two in terms of ease of doing business, according to the World Bank. So there’s no reason why China can’t become a world leader…
This may be easier said than done. In a culture that is heavily rooted in filial piety, that is the virtue of respecting one’s parents and ancestors, criticism or even benign feedback is often feared, and in some cases punished. And that’s why constructive criticism must be part of a company’s ‘process’, with the easily swayed human bias removed. The use of Balanced Scorecard or even simple KPIs are step two. Building a culture of RACI, that is Responsibility, Accountability, Consult and Inform, is step three. And step four is removing proactive behaviour and risk taking from the list of taboos, and embedding delegation practices into best practice management practices through active rewards and encouragement. And that’s just the beginning.
The question of whether China will become the world’s largest economy is a moot point. The debate now focuses on ‘when’ and for ‘how long’. Sooner and longer are the answers, but only if a renaissance of self awareness can emerge from China’s corporate leaders. And that is why, for the success of the Middle Kingdom, HR will become the lynchpin to that success.