Traditionally, inner China has appealed to multinational executives for its cheap manufacturing labor pool. Direct management of local employees was unnecessary as there were no employees, or at least very few. Jobs simply were outsourced to third party Chinese companies, who managed their own employees.

But as China now looks to increase domestic demand for goods and services - notably by means of a new major stimulus plan - to offset revenue losses in the export market due to an ailing global economy, it’s high time for more multinationals to look at China’s domestic market, particularly in these regions where once they saw only work hands rather than mouths to feed and bodies to accessorize.

HR – as it always is in China – will be one of the greatest problems for companies delving deeper into the China market. Jack Perkowski had some recent insights on this issue in AmCham China’s China Brief magazine – which we already highlighted - and so did Gregory P. Gilligan, general manager of corporate affairs for McDonald’s China.

“Projected year-on-year wage percentage increases for the near future at many large multinational companies are in the mid-teens,” Mr. Gilligan wrote.

So much for that cost-of-living wage increase companies are used to doling out in the United States.

What can companies do to ensure that Chinese management is earning its keep in these regional cities?

Mr. Gilligan suggests:

• Look for management talent both inside and outside the company. And by inside, he means, even people who are loyal burger flippers could have the potential for corporate management duties. Training opportunities in meetings, classes and seminars could help let latent talent rise to the surface. “Inside advancement opportunity” should be “on par with outside hiring opportunities.”
• Don’t fall into “tier” thinking. Rather, when considering compensation, consider geographic differences. Local regulations and market forces vary widely in inner China, and can’t be simplified to fit into a tier system. “Those looking for efficiencies need to be able to navigate the local differences in social costs,” Mr. Gilligan wrote.
• Beijingers aren’t better than Chongqingers. Every employee should have equal opportunity for recognition, advancement, and financial rewards. Top inner city talent should have the ability to get top job slots in Shanghai if they want. Overall, inner talent won’t be lost this way, but nurtured with incentives to work hard and smart where they are now. Eventually, if they return to their home provinces, they also may bring a more urbane set of skills back to the local workplace.

Steven Schwankert, meanwhile, who apparently knows his way around China’s cities as much as scuba terrain (he’s a well-known China scuba guy), reports for the Beijing bureau of IDG New Service that four second-tier cities are particularly noteworthy for technology development. It’s an interesting list because it shows how inner China has come a long way from our coal mine perception of it. It also shows that even in a high tech sector like uh – technology – it’s possible to find excellent HR talent.

Notably, check out:

• Hangzhou: The best commercial city in China for five years straight, according to Forbes. Aside from beautiful, it’s one of 10 national software bases and is home to Alibaba Group, China’s biggest internet company.
• Xian: Forget the terracotta warriors. This is a “tech center in part thanks to its large number of universities which turn out a regular supply of talent.”
• Dalian: Quality of life here is great, attracting talent from China’s northeast. It also has plenty of experience dealing with nearby international neighbors like Japan.
• Chengdu: Forget the earthquake. Minimal damage was noted there. It’s one of the largest China cities, home to 28 Fortune 500 companies, with international air connections throughout Asia.

Mr. Schwankert notes that job hopping is still can be a serious problem in the second tier, quoting Cyrill Eltschinger, CEO of outsourcer Softtek China, as saying: “Dalian has done a good job initially at promoting itself as an outsourcing city, initially with a focus on the Japan market, but now everyone goes there for any market. They are getting caught in the ‘too many companies planted there’ while talent is limited and can be leveraged primarily from the north of China only.”

But the resulting job hopping should be something multinational companies are used to from their Beijing and Shanghai experience. The second-tier HR picture may not be pretty, but it’s pretty common already. You’re already getting used to it so you might as well take the plunge and localize that workforce – really local.

Related:

• Jack is Back to Tell Us Why We Need Shanxi Now
• How Ronald McDonald Talks to Communists

    Channel: Local Wisdom     |