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Adaptability is now a critical, but challenging, quality for companies worldwide, and especially so in China. IBM’s newly released Global Human Capital Study 2008 offers insight into this growing need, with recommendations on creating a flexible corporate culture in China.
Changes in China’s business environment often come with the speed and intensity of a machine gun. New consumer trends sweep through the country with dizzying speed (Super Girls is hot one season, not hot the next), and shifting international trade policies send tremors through factories in Chengdu and Xi’an as soon as they hit Google News. The inter-connectedness and complexity of the global economy requires businesses throughout the world to adapt to situations that are changing daily - and the impact is felt from the most senior executives to the newest hires.
The bottom line: today’s global market demands extreme flexibility among successful businesses, but adaptability can be a difficult skill to acquire. Businesses need to start thinking creatively about how best to train their workforce in this critical skill, according to the findings of the IBM Global Human Capital Study 2008 released in October. The adaptability of a company as a whole, the study maintains, is closely tied to the flexibility of individual employees.
The study surveyed more than 400 HR professionals in 40 countries worldwide. While the study is global in scope, specific attention was paid to emerging markets, in particular India and China, where human resource challenges are often the most critical. “The human capital issues in China are arguably more pressing and more serious than any other region,” says Nigel Knight, managing partner at IBM Global Business Services, Greater China. “Companies have to build the right human resources to support what, for most industries, is unprecedented levels of growth.”
During the course of the study, interest in China was so high that IBM, which traditionally launches survey results from its New York offices, came to Shanghai to kick off the launch. The resulting study found that the struggle to attract and retain personnel is also more highly recognized in China than elsewhere; 67 percent of Chinese respondents stated that their workforce strategy is both driven by and influential to the company’s overall business strategy, compared to 39 percent globally.
The study identified four key goals among HR professionals worldwide: create an adaptable workforce, use an effective talent management model, locate and train leaders, and use effective workforce analytics to measure success and set strategy (see chart). These four concerns apply to China particularly acutely given the country’s rapid growth and huge size, increasing demand for talent and the need for flexibility alongside increasing sales. Commenting on the reputation of Chinese consumers for being fickle, Knight said: “Trends [in China] change very fast and people’s wants and needs change very fast. You have to make better use of your workforce to adapt.”
Wanted: expertise, collaboration skills
An adaptable workforce is one that can shift to take on new tasks, new marketplace trends and new regulatory demands without skipping a beat. Such abilities require employees to draw upon a broad base of skills while maintaining an area of specialization. Changes in consumer trends, for example the growing emphasis on environmentally friendly products and practices, may require a company to redeploy or reorganize their workforce. “A company may always have 20,000 employees in a country, but the products and services they’re working on and how they’re organized may be changing more dynamically than before,” says Knight.
The study pinpointed three main aspects of a truly adaptable workforce: the ability to successfully locate experts suitable for specialized subjects, the ability to collaborate across organizations, and the ability to predict what skills may be critical in the future. In the global survey, only 14 percent of respondents worldwide displayed confidence that their workforce is truly adaptable. The survey also finds that activities that could foster an adaptable workforce are often compartmentalized and uncoordinated.
In China, Knight says many multinational companies are beginning to think outside the box in order to help employees to gain the critical skills now needed to compete globally. Two methods of coping with the new need to equip staff with a wide range of diverse skills are: outsourcing and e-learning programs. For China-based companies, however, these channels are not as well developed as in other major markets worldwide.
Lack of leaders
Shortages of key personnel add to the challenge of building flexibility into operations, especially for China-based companies. Says Knight: “We are resource constrained in a country of 1.3 billion people. That’s the reality.”
One factor making the talent squeeze especially acute in China is that, while many multinational companies seek to fill their leadership positions locally, there is a missing generation of potential leaders in China. Many Chinese citizens in the senior management age group suffered from an interrupted education and work experience during the political turmoil of the 1960s and 70s. Multinational companies in China are therefore trying to train younger leaders in a short period of time.
In fact, the problem is a global one, though it is especially acute in China. In the global survey, building leadership talent topped the list of concerns of the companies surveyed, with 75 percent of respondents citing their inability to develop future leaders as a critical problem.
In response, IBM recommends that developing talented leaders not simply be considered as a job for the HR department. Instead, companies are recommended to provide training and support at all levels of development, and to establish clear and integrated systems of evaluation and promotion throughout the company. High-potential individuals should be recognized and encouraged early in their careers, to help them develop strategic skills and to prepare them for future leadership positions. Chinese firms were particularly in favor of mentoring programs as an effective means to build leadership skills, the study found, with 33 percent of Chinese respondents reporting that they find mentoring very effective, as opposed to 13 percent of companies worldwide.
Mentoring and other innovative programs can help companies establish clear opportunities for career development - a quality that is especially valuable to China-based operations. That’s because another key challenge facing Chinese employers is attracting talent in the first place.
When hiring, the survey found that multinationals in China enjoy a number of advantages. In particular, the survey shows that a “positive corporate reputation” was recognized as a driver for employee attraction by 80 percent of Chinese respondents (globally only 49 percent listed corporate reputation as a driver).
One factor currently inhibiting the ability of MNCs to hire adequate numbers of personnel, says Knight, is their tendency to recruit only from China’s top universities. The emphasis on graduates from only the top-tier universities has driven some companies away from local recruitment. “No one thinks it’s a bad thing in the U.S. to be recruiting in the local market,” says Knight. “[In China] there has been a bit of an obsession because multinationals don’t know the whole education market and they tend to gravitate toward those prestigious institutions.”
Solutions to the problem include looking toward other universities beyond the top 1 to 2 for recruiting and offering increased opportunities for training and education, including overseas experience. As potential employees become more and more discerning, there is no room for complacency among global companies, Knight says.
Domestic Chinese companies, however, tend to face greater, more fundamental challenges. “They’re lacking the core human resource management policies, processes and systems to really help take them to the next level,” says Knight. “Just adding more people is no longer enough.” To remain competitive with a talent pool looking for career-building opportunities, Chinese companies are beginning to put into place measures for clearly defined payment systems, job definitions and evaluation processes, ensuring that job descriptions align with business functions, and that pay aligns with performance.
An emerging problem, is that many domestic companies are now struggling with issues facing their own overseas operations. The move into the global marketplace has brought questions of culture and language to the forefront and many companies are facing the additional challenges of adapting their workforce to new languages. One of IBM’s domestic client companies, for example, has begun requiring that presentations be made in English, despite the fact that some top management require translation. Cultural differences are also a top concern among multinational companies in China. More and more companies are looking to recruit local talent that will easily be integrated into the global standards and practices of the international company. This, again, requires support and training at all levels of the organization.
Integration
The treatment of human resources within the company can have a large impact on any company’s ability to successfully recruit and train talent. Only 39 percent of the survey’s respondents worldwide reported that HR executives regularly engage in discussions with other business units. This lack of communication is sited among companies surveyed globally as one of the primary obstacles in using human capital data and information to make effective workforce decisions.
The study found that not only are companies unable to link data collected by the HR department with other departments, and that many of the databases and processing systems used by the HR department cannot be shared with other departments.
This dis-connect between the HR function and other functions in a company can be particularly damaging among Chinese companies, Knight says. Here, human resources departments tend to be confined largely to administrative duties such as processing requests for leave, handling salary payments and performance evaluations. While many Western companies have turned to electronic or self-service programs to take handle these duties, many Chinese companies have maintained the traditional methods. The result, Knight says, is that HR processes tend to be viewed as simple housekeeping procedures, adding little value to the company overall.
The report suggests making a number of changes within HR departments, and across entire companies. In general, the study recommends improving communication, integrating technology and increasing training in order to develop a flexible and effective workforce. To increase the effectiveness of their departments, the study suggests that HR directors take part in the company’s overall strategy and decision-making. In return, HR executives also must help the overall company with key tasks such as better serving clients or cutting costs (most surveyed companies listed “increasing top line growth” as a top concern).
IBM is using findings from the Global Human Capital Study 2008 not only to direct its own activities in China, but also to advise its client companies. As companies move farther into China’s interior, human capital will only grow in importance, Knight says. Companies must continue reviewing their offerings for employees and how they systematically foster development, growth and flexibility. When it comes to recruiting, training and retaining talent in China, and throughout the world, the study finds that complacency is not an option.
The full IBM Global Human Capital Study can be downloaded at http://www-935.ibm.com/services/us/gbs/bus/html/2008ghcs.html
