Over the past year or two we’ve been reading more and more about the growing competition for talent inside China, which is creating rapid wage inflation at domestic and international companies operating within the country. The latest McKinsey Quarterly has another article furthering that point.
The growing need for talented managers in China represents by far the biggest management challenge facing multinationals and locally owned businesses alike. In a recent AmCham Shanghai survey of US-owned enterprises there, for example, 37 percent of the companies responding said that recruiting talent was their biggest operational problem—more than the number who cited regulatory concerns, a lack of transparency, bureaucracy, or the infringement of intellectual-property rights. Separately, 44 percent of the executives at Chinese companies surveyed by The McKinsey Quarterly reported that insufficient talent was the biggest barrier to their global ambitions.
The article goes on to detail several aspects of the problem, including how domestic Chinese companies are increasingly going after the same high-value talent as international companies. This is creating a new dynamic that should concern all of us: Chinese companies recruiting globally.
Hampered in their global aspirations by a lack of managerial talent, Chinese companies seem poised to recruit worldwide to fill the void. In a McKinsey Quarterly survey of executives at companies headquartered in China,1 30 percent of those at companies with activities abroad say they have no senior managers—C-level executives or business unit leaders—from outside mainland China, and 27 percent say their top teams have only a small foreign component, at 5 percent or less. But 43 percent of those executives say they expect the proportion to increase over the next three years. If these expectations play out, Chinese companies and multinationals alike will find intensified competition for capable global managers.
High value talent is not a minor concern for those companies.
At the root of this global search for talent, our survey shows that, above all, Chinese executives worry about managerial capabilities. Forty-four percent of respondents at companies based in China say a lack of managerial talent is a barrier to conducting activities outside of China. Although it’s no surprise that a lack of talent is holding back Chinese companies, the intensity of the concern is eye-opening. The next-largest barrier, a lack of capital, was cited by only a quarter of the respondents.
And we’re not just talking C-suite folks.
Chinese companies will be hiring globally throughout their organizations, not just for the executive suites. Looking at their total workforce, 57 percent of the respondents at companies with activities abroad say less than 5 percent, if any, of their workers now come from outside mainland China. But 62 percent of respondents say they expect the foreign contingent to increase over the next three years, including 16 percent who expect a significant increase.
Pretty amazing… a country with 1.3 billion people needs to recruit globally. But will the tide begin to swing the other way once their knowledge and experience achieves par with their global counterparts?
Chet Frame says
There was a very interesting article in this week’s U.S. News & World Report about how many companies in China are being forced out of business by: lack of labor, government regulation, and higher standards.