Category Opinion and View

China’s Leadership Gap

Summary: After 28 years of reform, China now faces accelerating challenges of an unprecedented scale. Of these, none is more critical — or more daunting — than nurturing a new generation of leaders who are skilled, honest, committed to public service, and accountable. Without them, Beijing’s public promises of a prosperous, democratic future will go unfulfilled.

John L. Thornton is a Professor at Tsinghua University’s School of Economics and Management and its School of Public Policy and Management, in Beijing, and Director of the university’s Global Leadership Program. He is also Chair of the Board of the Brookings Institution. He retired as President of Goldman Sachs in 2003.

RECRUITING THE NEXT GENERATION OF REFORMERS

After 28 years of reform, China faces challenges of an unprecedented scale, complexity, and importance. China has already liberalized its markets, opened up to foreign trade and investment, and become a global economic powerhouse. Now its leaders and people must deal with popular dissatisfaction with local government, environmental degradation, scarce natural resources, an underdeveloped financial system, an inadequate health-care system, a restless rural population, urbanization on a massive scale, and increasing social inequality. Most of these problems, of course, have existed throughout the period of reform. What is different now is that the pace of change is accelerating while the ability of the state to manage that change is not keeping pace.

Solving any one of these problems by itself would be a formidable task. But Beijing must deal with all of them at once. Because China’s government is a one-party system with minimal popular participation, success depends on the energy and ideas of its leaders. Yet the Chinese government today finds it harder than ever to attract, develop, and retain talent. Graduates from the country’s top universities, who once would have filled government posts, are instead choosing to take jobs in the private sector. Ironically, by creating new opportunities for talented people, China’s three decades of reform have made undertaking new reforms more difficult. Moreover, the structure of the country’s bureaucracy stifles initiative and promotes mediocrity. Worse, many officials, from the village to the central government, are corrupt, eroding the government’s effectiveness and feeding popular discontent with the system.

Of all of China’s challenges, none is more critical — or more daunting — than that of nurturing a new generation of leaders who are skilled, honest, committed to public service, and accountable to the Chinese people as a whole. Unless China manages to produce such leaders, Beijing will fail to meet the country’s challenges, and its public promises of a more prosperous and democratic future will remain unfulfilled.

MANDARINS AND MULTINATIONALS

For much of China’s history, the central bureaucracy attracted the country’s best and brightest. The famous imperial testing system for identifying future mandarins provided what was, at least in part, a merit-based route to social advancement: government service, especially when combined with personal connections and keen political skills, was the fastest path to power and wealth. Although the powerful state that emerged after the ascendancy of the Chinese Communist Party (CCP) in 1949 changed much in Chinese society, it only reinforced the bureaucracy’s near monopoly on talent. Today, however, many ambitious Chinese no longer regard a government job as the best route to success. And those who try to pursue careers in government after spending time in the private sector often find that their way is blocked.

China’s educational system continues to identify the best minds (or at least the best test takers) and send them to top universities. Once there, however, most students now study what they find most interesting or what they think will be most lucrative instead of taking courses designed to prepare them for …

HR Market Growing Fast in China

By Frank Mulligan, Talent Software

The recruiting of staff is the greatest challenge that HR practitioners in China face.

But turn the turtle on its back and we see that recruiting is big business. There is a lot going on underneath. A mulititude of players offer everything from executive search to Applicant Tracking Systems (ATS).

These international players are currently targeting China.

The graphs below tell an interesting story. They are based on a large scale study of international companies who offer some form of solution for recruiting. They illustrate well how the investments in the recruiting space have shifted from Hong Kong to Mainland China, and specifically to Shanghai. China is taking off, with Hong Kong flat. The study was done by a London-based MandA specialist called The1, and if you want to know more go here and click on ’Research’.

So the good news is that the kinds of recruiting support services that are avalilable in most countries around the world will soon be available in China. This would include Recruitment Process Outsourcing (RPO), online hiring services, background checking based on call centers, online skills testing, outsourced payroll and benefits, Applicant Tracking Systems (ATS) and so on. The 1 tracks them all.

These additional support services will make life a little easier for HR professionals in China. They won’t solve the biggest problem, which is the shortage of skilled, experience staff.

For that we still have to get our hands dirty.

Has Korn/Ferry Hit the Ceiling?

The employee-search outfit’s stock hit its highest level since 2001, but some analysts think the climb may be nearing an end

by Alex Halperin

Based on the recent strength of Korn/Ferry International (KFY) shares, many investors would no doubt give the headhunter high marks in a performance review. Shares of the executive and middle-management search outfit brushed $23.18 on Oct. 17, their highest level since May, 2001. What’s behind the strong showing? Analysts attribute the performance to a combination of strong management by the company and macroeconomic factors like low unemployment.

Indeed, in a recent conference call with analysts, the company crowed about the falling U.S. jobless rate, and, more specifically, even lower unemployment in the job market for white-collar workers and those with a college degree, which increases demand for its services. It also highlighted falling unemployment in Britain and Europe, where the company has a large presence. But amid the positive news, analysts disagree on whether investors will be able to squeeze much more juice out of the company, at least in the short term.

Just a few years ago, the shares were underemployed. Following the September 11 terrorist attacks, the stock wallowed in the doldrums, spending much of 2002 and 2003 in the single-digit price range. But as job growth has returned—albeit not as robustly as some would like—and the Dow has reached new heights, Korn/Ferry was well-positioned for the ride.

Database Management
The Los Angeles-based outfit recruits senior-level executives and middle management employees, the latter through a unit called Futurestep, which focuses on employees with salaries in the $75,000 to $150,000 range. By combining the company’s recruitment expertise with a database of job-seekers, Futurestep is “pioneering the market,” says SunTrust Robinson Humphrey analyst Tobey Summer. There are “hardly any global competitors to what Futurestep does,” he adds. Futurestep complements Korn/Ferry’s much larger executive recruitment business since employers looking for one service can end up using both.

For the quarter ended July, the company posted revenues of $161.1 million, up from $129.1 million a year earlier, with quarterly net income rising from $11.6 million to $13.7 million. Though the company has offices worldwide, it saw the greatest revenue growth in its core North America executive-recruitment division.

Analysts applaud the company’s recent performance but question whether the stock has more room for growth, at least in the short term. Bulls can find encouragement in the relatively strong corporate-earnings climate, which could lead to more hiring. And at the lucrative senior levels, there’s a growing need to replace retiring baby boomers.

Competitive Consultants
The company is “catching a good cyclical time for the business,” says Summer. Despite his enthusiasm, he rates the stock neutral. He says the company is well-positioned globally with an extensive office network across Europe and Asia.

But he doesn’t see that translating into notably better profit margins. He also says that after a few good years, the executive recruiting sector as a whole is doing more promoting and hiring their recruiters from outside the industry instead of tapping more experienced headhunters. While new recruiters—Korn/Ferry calls them consultants—are a sign of a growing industry, they tend not to deliver revenue as quickly, Summer says.

Korn/Ferry no doubt owes some of its recent success to strong performance in the sector. Smaller rival Heidrick & Struggles International (HSII) is also trading near multiyear highs. But over the past five years Korn/Ferry’s stock has outperformed Heidrick’s. With both outfits armed with ample balance sheets, Summer speculates that they might be on the prowl for acquisitions, though probably more for secondary businesses than executive recruiting.

Labor Upturn
Standard & Poor’s, which has a long-standing buy rating (four stars out of five) on Korn/Ferry, says it expects revenues to climb 15% for the year ending in April. Despite this generally positive outlook, though, it cautions that the stock remains vulnerable to “the possibility of an unexpectedly weak global economy.”

S&P analyst Michael Jaffe remains relatively bullish. It’s a “pretty well-run company,” he says, adding that “a lot of the human-resources companies are doing well because we’ve been in the midst of a labor upturn for past few years.”

In a recent report, Korn/Ferry market-maker Merrill Lynch (MER) agrees with Summer that it doesn’t see much more near-term upside for investors. And it doesn’t expect the company to add a dividend soon.

While the company’s prospects appear solid, the shares may not be able to climb the ladder much higher. Perhaps it’s time for investors to start thinking about the exit interview.

How to get to grips with the dragon

China’s ultimate evolution as a fully-formed commercial market has been fuelling many pound and dollar-filled fantasies ever since the country opened its doors to foreign investment.

But while numerous Western companies have already set up shop in the world’s most populous country, employment issues continue to puzzle and confound many a corporate transplant, and none more so than than the issue of recruitment.

Recruiters who expect to do business in China will need to adopt a new mindset about pay and benefits packages, social concerns, status issues and even old national rivalries as local values colour candidates’ perspectives about job opportunities.

Students are sought after

The UK provides fertile ground for recruiting educated Chinese who plan to return to their homeland, says Ting Zhang, chief executive of Cambridge-based China Business Solutions (CBS). As many as 50,000 students from China are currently studying in the UK. Recruiting a UK-educated Chinese person for a job with a UK company operating in China will generally mean getting a person who speaks good English and is familiar with British culture.

Employment costs are typically 30-50% higher in China’s coastal area, where many of the major cities are located, than in its inland regions. But with mid-level engineers only earning an estimated £400 per month in coastal regions, pay levels are generally lower in China than in the UK. However, companies should expect to pay 13-month salaries, annual increases of 8-10%, and up to 50% of a person’s salary in benefits, says Ling Ling Bravo-Escos, also of CBS.

Since the 1990s, social insurance benefits will include money for housing (to buy, renovate or build a house), pension, medical and heating, among others.

The ‘one child per household’ rule in mainland China also means a special consideration for women employees where time off is concerned. As well as maternity leave, women also must be given time off to end pregnancies, Bravo-Escos says.

To recruit top candidates, the points having most impact, according to CBS, are a company’s brand and local awareness of that brand, the job description, job title, a pleasant working environment, a competitive salary and benefits. High emphasis is also placed on long-term career opportunities.

That emphasis on the long-term means that permanent work is still the favoured form of employment in China. Contracting as an employment choice has yet to catch on, says Patricia Leech, sales director for SAP recruitment specialist Portland Resourcing, London.

Foreign contractors

Leech says that most of the contractors her company recruits to work on multinational projects in China come from Malaysia and Australia. So far, the company has recruited but one local hire, for the position of functional team lead consultant.

One unique aspect Leech has discovered to recruiting in the Chinese marketplace is the strength of consultant networks. “Consultants’ networks are very strong,” she says. “What you tend to find is that they’re all asking each other if they know someone for a particular job.”

Lacking in market awareness

She has also found a certain naivete among local candidates as to their market worth. “People within China aren’t aware of what they could be getting. They aren’t very savvy to the market,” she says.

The world of online recruitment in China is growing steadily but online analysts believe the market is still years off achieving its full potential. US job board operator CareerBuilder.com last month signed an exclusive agreement with Chinese job board www.51job.com that will give the US operator access to the Chinese online recruitment market.

The American giant has begun to expand its global reach with its own country-specific job boards, but company leaders felt that the Chinese market has not yet evolved sufficiently to install its own branded site. CareerBuilder wanted entry to China, nevertheless.

“We spent the last year looking at the Chinese marketplace,” says Farhan Yasin, president of CareerBuilder’s international group. “Our estimate is that online recruitment there is worth $150m, and it’s growing at 43-48% a year.”

The greatest hurdle in China, Yasin told Recruiter, is “first and foremost, the country’s infrastructure”. While major cities have embraced the internet, most Chinese live in rural areas where internet access may be limited.

It’s a cliche that China’s economic potential is as vast as its landscape. But equally as vast as the landscape is the labyrinth of cultural idiosyncrasies, regulation and growth challenges that will require years of manoeuvring and optimising before China’s economic potential can be realised.

Why populous China is facing labour shortages

By Abdullah Al Madani, Special to Gulf News

It may be surprising to know that China, the world’s most populous country, whose economic boom has largely depended on the advantage of having a huge supply of low-cost workers, faces labour shortages. Studies conducted recently show that China’s problem of worker shortage, which first appeared sporadically in 2004, has now become a more persistent one. The problem has pushed up wages at a time when costs of manufacturing goods are already rising due to increases in energy prices. This is likely to weaken Chinese-made products’ competitiveness on world markets, and force investors to move to lower-cost countries such as India, Vietnam and Bangladesh.

Chinese factories had to raise the minimum wage this year by as much as 30 per cent to between $70 and $85 a month. With this increase, the largest in a decade, a worker in China today is paid 30 per cent more than his counterpart in Vietnam, for example.

Acute problem

The shortage of workers is most acute in the country’s export regions, namely the Pearl River Delta, which feeds into Hong Kong, and the Yangtze River Delta, which funnels into Shanghai. For example, it was officially reported that the city of Shenzhen, on the Hong Kong border, alone faced a labour shortage of about 300,000 workers this year. Commenting on the issue, a Chinese human resource expert said that a few years ago, millions of young people were still flooding into Shenzhen to search for any job at any wage, and factories did not need to put up advertisements to recruit workers or tempt them with incentives and benefits. He added: “Now we put up a sign looking for five people, and maybe one person shows up.”

Factors contributing to making a country with a population of 1.3 billion have a labour shortage of nearly two million people according to an estimate are numerous. First, demand on workers has enormously increased in recent years, owning to the vast expansion of industrial, construction and services sectors.

Second, low wages, tax cuts, and long-working hours have all pushed a large number of migrant workers to quit their jobs in the booming coastal pro-vinces and move back to their farms in western provinces. The government’s decision last year to eliminate the agricultural tax has fuelled the trend.

Third, Beijing’s recent policy of closing the income gap between the urban rich and the rural poor through developing the economies of poor inland provinces and launching housing and infrastructure projects has created many jobs. As a result, young workers from the countryside are less willing to leave home for booming areas in search of a better life.

Fourth, unlike China’s old generation, whose members sought employment without proper education or skills, members of the new generation are more ambitious and would rather first develop their skills or have university degrees in order to avoid jobs that are harsh and pay little. This can be supported by the increasing number of university students. Last year, for example, over 14 million Chinese students joined local colleges and universities, up from 4.3 million in 1999.

More old people

Fifth, China’s one-child policy, which was implemented in 1979, has turned it into a country of more old and less young people. This is most acute in Shanghai, China’s model of economic prosperity, where the age group of 60 and above is expected to account for 30 per cent of the population by 2020. Because of this policy, the number of Chinese aged 15-19 will decline by 17 per cent in five years, to about 103 million from 124 million today, according to a report.

China’s dilemma, however, is not confined to the shortages of unskilled or semi-skilled workers. In addition, both public and private companies are having trouble finding enough talented employees and highly skilled labour to fill junior and senior managerial and other posts.

The evidence can be derived from a decision last month by the Shanghai municipal government to hold job fairs in North America in an effort to attract expatriates and overseas Chinese professionals to work in the city.

According to a recent study conducted by McKinsey Global Institute, Chinese firms seeking to expand abroad and continue growing in the years to come will need up to 75,000 internationally experienced leaders. Currently, only 5,000 such leaders are available in the country. Local universities must be held responsible for this, given their failure in producing more graduates capable of working successfully in world-class-companies and brilliantly serving the fast-growing domestic economy. Among the 1.7 million students who graduated in 2003 from over 1,500 local colleges and universities, only a few hundreds had good English and practical experience a requirement of most multinational firms.

Recruiters in China – Information Smart or Information Starved?

By Frank Mulligan, Talent Software

Unlike in the past, we are awash in information here in China right now.

We know the economy is developing at 9% every year and that Foreign Direct Investment is in excess of US$50 billion per year. We know about the ’War for Talent’ and that staff turnover is now in excess of 25% for most companies in China. So getting information is easy, especially numbers that underline the narrative of a growing, developing economy. On the other hand, getting validated information at the right time is always difficult to do, and costly.

Recruiters are essentially in the business of finding, evaluating and using information about the suitability of a candidate for the positions in their company or client.

In order to achieve their goals they must separate truth from fiction, fact from rumour. And to do this they have to be able to evaluate the information they have using the current toolset of the recruiter; behavioural interviewing, psychometric assessment, Performance Profiles, background checks, Topgrading, skills tests, Work Samples, reference checks and so on.

Missing Data
Each of these methods has it’s own limitations. There are figures for the validity of each method that would suggest that there is a strong case for using them.

However, a couple of years ago we asked 40 companies in China about their hiring processes and the results were not very encouraging. Few did reference checks (<10%) and very few did backgrounds check(<1%). Some did a scripted phone screen with candidates(<3%) but most had not even considered the idea. Many knew what Behavioural Interviewing was but less than 20% said they used it in practice. A majority of companies in our informal survery did not use any type of intelligence, skills or personality testing during the recruiting process. This was a bit surprising given that these kinds of tests have been available in China for many years. And in Chinese. Add to that the huge costs of hiring the wrong person and you have a strong justification for using them. But companies didn’t at that time. Since then we have seen the introduction of affordable background screening, and the arrival or more and more validated psychometric and skills tests. This has clearly increased the numbers of companies using these kinds of tools but we won’t know what the figures are until we check again. If you want to know a little more about the validity of various assessment methods this chart might be a good start. Selection Method - "Predictability" Handwriting Analysis - 0% Age - 0% Amount of Education - 0% Self Assessment - 3% Projective Tests - 3% Traditional Interviews - 4% Grade Point Averages - 4% Expert Recommendations - 4% Personality Tests - 4% Motivation - 4% Reference Check - 6% Biographical Data - 9% Situational Interviews - 9% Behavioral Event Interviews - 10% Mental Ability Tests - 25% Content Valid Simulations - 64% Adapted from a meta-analysis conducted by Hunter and Hunter, Psychological Bulletin, Vol. 96, 1984. Percentages have been rounded. Predictability refers to the explained variance.

Large numbers of low quality talent hurt China

China needs to take action against the large number of poorly qualified and low quality professionals with university or college certification, Chinese Talents Society Vice President Wang Tongxun said.

China Youth Daily reports Wang Tongxun issued his warning at a forum on human resources development held recently in Beijing.

Record numbers of Chinese citizens have received higher education in recent years. Over 66.5 million people have college degrees or above and around 17% of high school graduates enrol at university. There were 2.8 million graduates in 2005, nearly 9 times the number of graduates in 1985.

But Wang Tongxun said that as universities and colleges grow from institutions that cater to an elite group of students to institutions that education the masses, several problems have been created.

Degrees and titles are easy to obtain in China. Some universities or colleges issue diplomas recklessly, even providing them to people who have not attended the university courses. The lack of a sound qualification system allows poorly skilled Chinese professionals to receive titles more easily than their foreign counterparts.

Wang Tongxun also said the academic research at Chinese universities and research institutes is often carried out in a poorly planned and impatient manner. The resulting papers are rarely cited by foreign researchers and rank below 120 in the world in terms of citations. As a result, most of the research has no value and can’t be put into practice.

To compound the problem, the tendency for employers to value people according to their degrees rather than their talent and work experience has led to a culture of degree-hunting where people neglect to improve their talents in a measurable way.

Finally, Wang Tongxun said the phenomenon has led to a brain drain. Around 930,000 Chinese have traveled overseas to study since 1986, but only 230,000 have returned

Obstacles To Innovation In China And India

From the CEO of Infosys

Globalization and the convergence of information and communication technologies have dramatically boosted the power and speed with which businesses, organizations, and individuals can access, process, and adapt information. This has given rise to the knowledge economy, where markets can trade what has long been untradable: workers’ education and skills. In the new dynamic, efficiencies in productivity growth are less important. Instead, growth is driven by the capacity of economies to create knowledge and innovate.

Three new innovation models are emerging. One is process innovation: wiring everyone to the same network and leveraging the cost, talent, and volume of an integrated global economy. Another is creating pint-sized products and services sold cheaply to masses of poor people. A third is innovating through local partnerships and networks to get around external hurdles, whether bad roads in India or bad government policy on IP in China. You see all three models in India. Boston Consulting Group put out a list of 100 emerging global companies; 21 of them were in India.

Initially, cost advantages attracted global companies to the emerging markets of China and India. China’s Pearl River Delta quickly became a hub of low-cost manufacturing, and the country’s manufacturing sector grew annually at 11.4% from 1993 to 2003. After economic reforms in 1991, India’s large pool of low-cost, technically trained talent made possible that nation’s growth as a global provider of IT services.

But today multinationals are beginning to leverage the skills of Indian and Chinese knowledge workers to innovate, and they are building strong R&D capabilities in these markets.

Innovation in China and India, however, has not grown on a truly global, commercially significant scale. Indian companies have yet to come up with significant innovations in entire product lines. Chinese outfits have launched clever but imitative products, and China’s R&D capabilities lag those of Taiwan and South Korea.

China and India rank 49th and 50th in the world respectively in terms of productivity growth. Their economies face major challenges to improved innovation. They lack end-to-end logistics, effective infrastructure, and strong regulatory systems. By understanding such weaknesses, corporations can devise alternate strategies and business models to transform the two countries into growth markets.

India has poor infrastructure, low literacy levels for many people, and labor inflexibilities. So high-volume manufacturing has not taken off yet in a big way. Yet businesses are using technology and communication networks to build virtual, interconnected innovation ecosystems to overcome the gaps. A network can tap multiple sources of innovation, including entrepreneurs, research labs, and students and faculty in educational institutions, such as the Indian Institutes of Technology (IITS).

Unearthing specific consumer needs in emerging economies can also aid innovation. HP Labs in India identified power outages as a key factor limiting the access and utility of computers in rural areas, so it designed a community PC that can run on car batteries.

There’s huge innovation in creating a high-volume, low-price business. CavinKare, an Indian company, began selling shampoos in the 1990s in cheap, single-serve sachets to make them accessible to the nation’s rural poor. This business model was replicated by Unilever (UL ) and Procter & Gamble (PG ).

India absorbs about 4 million to 5 million mobile phones a month, and its mobile rates are about 1 cents a minute, the lowest in the world. Clearly companies have innovated: They figured out how to stay profitable even selling telecom services at a penny a minute. They’re reaching consumers who are essentially not part of the formal financial system. If you can deliver to such people products or services in small units at a low price, the market is suddenly open to a much larger base.

In the end, innovation capability depends on economic flexibility. The U.S., with its entrepreneurial culture, relaxed labor markets, and free capital flows, continues to be the most innovative economy in the world. India and China need such an environment to bridge the growth and productivity gap between emerging markets and the developed world and to truly transform themselves into innovative, energetic economies.

Firms in China Think Globally, Hire Locally

By Cui Rong

From The Wall Street Journal Online

BEIJING — Du Limin is living the American Dream — in China.

A decade ago, Ms. Du joined Wal-Mart China as an accountant. Today, she is a director overseeing three Sam’s Club supercenters and more than 1,500 employees in China for the U.S. retailer, Wal-Mart Stores Inc.

Ms. Du’s rise has been replicated across China as multinational corporations fill management positions with local talent. According to Taihe Consulting Co., of Beijing, about 70% of foreign firms’ top positions today are filled by Chinese workers. In the mid-1990s, almost all such posts were filled by non-locals.

In recent years, more Chinese have studied or worked overseas, strengthening their English-language and leadership skills and making them more suitable for management positions, executives at multinationals say. “My first choice will always be local,” says Niklas Lindholm, human resources director for Nokia Corp.’s Chinese investment unit in Beijing. “We are an international company and we need the variety.”

Multinationals in other developing countries also have localized their staff after establishing themselves in a market. Many locals, for example, have moved up through the ranks of foreign corporations in India. These kinds of developments have uncovered a wellspring of new managerial talent and are changing the way global corporations do business locally.

Executives at foreign companies in China say local hires cost less to employ than expatriates and often have a better understanding of the Chinese market. A Chinese manager, on average, has a total compensation package that is only 20% to 25% of that of a hire from a Western country, says Taihe Consulting. Having a local boss also serves as a morale booster, giving career hope to ambitious junior employees.

When multinationals first opened in China in the early 1990s, expatriates filled most mid-level and senior management posts. Locals settled for junior positions. The expats, usually from the company’s home country, were valued for their knowledge of corporate culture. Some multinationals would tap managers from Singapore or Hong Kong where they were already established, before they would consider developing local talent.

Chinese managers began gaining ground in the late 1990s. Expats usually had costly relocation expenses, and often they proved less effective than locals as a result of cultural and language differences. Meanwhile, changes in China’s labor market — such as the reform of state-owned businesses and restructuring of government offices — freed many experienced managers to take jobs at multinationals.

The trends have helped transform the staff makeup of many companies.. At Siemens Ltd. China, a unit of Siemens AG, seven of nine regional managers are Chinese. Richard Hausmann, chief executive of the Chinese unit, says he wants to elevate a Chinese executive to the China operation’s six-person board of directors. Three of four regional managers at Motorola Inc.’s unit in China are local Chinese. At FedEx Corp.’s China operations, locals account for 78% of management positions.

Tu Min, vice president of communications at Telefon AB L.M. Ericsson’s China subsidiary, graduated from college in 1992 and took a government job. Three years later, as some of China’s best and brightest went to work for foreign companies, Ms. Tu heard about an opening for a translator at Ericsson. She joined the company in 1995, a year after it had set up its wholly owned business in China.

Her supervisor recognized her as a “quick learner” and “cheerful person,” and recommended her for a job as a public relations executive, she recalls. After stints in sales and business development, Ms. Tu was promoted to manage the communications department.

Ericsson helped pay for her advanced degrees, including a master’s in journalism and an MBA from the company’s China Academy in Beijing. Last October, Ericsson promoted Ms. Tu to vice president. Local managers now account for 90% of the firm’s middle management posts and half of its senior management.

Wal-Mart’s Ms. Du was also in one of the first waves of Chinese to benefit from localization. A few years after graduating with an accounting degree from a Shanghai college in 1986, Ms. Du took a job as an accountant in a Chinese cartoon company in the city of Shenzhen, bordering Hong Kong. When Wal-Mart started recruiting staff for its first China store, which was set to open in Shenzhenin 1996, Ms. Du applied for a job — although she knew nothing about retailing and had never heard of Wal-Mart, except that, as a friend told her, it was a big name in the U.S.

Ms. Du’s first job at Wal-Mart was as team leader of the Shenzhen store’s finance department. She says virtually all the managers at that time were Westerners or from Hong Kong. When the store’s general manager, who was from Hong Kong, predicted at a staff meeting that five years later someone from China would head the store, “all of us burst out laughing, thinking he was telling a joke,” Ms. Du recalls.

Ms. Du was named the store’s training manager in 1997 and its general manager in 2000. She became director of Sam’s Club in January. Today, local Chinese account for 100% of Wal-Mart China’s middle managers, and 99% of its senior managers.

Stephanie Wong, vice president of Wal-Mart China’s personnel division, describes Ms. Du as “an outstanding performer and one of many success stories at Wal-Mart China.” Ms. Du says one advantage she has as a local Chinese manager is that she can communicate better with her employees. “They take me as their big sister and they confide their family issues with me,” says Ms. Du, 43 years old. That “is impossible if you’re an expatriate.”

When SARS hit China in 2003, people were reluctant to go to stores and other public places. To assuage customers’ fears, Ms. Du required staff at the Shenzhen store she was managing to disinfect shopping carts after use by each customer. Although almost all of Shenzhen’s stores saw a decline in sales volume during the period, Wal-Mart’s Shenzhen branch maintained growth, Ms. Du says.

Ms. Du says for many Chinese, a barrier to advancement to Asia-Pacific or other regional posts is their lack of knowledge about the rest of the region. “We need to know more about other countries before heading the regional operations,” she says. But China’s vast market is a great training ground, she adds. “Being successful in China, Wal-Mart’s Chinese managers surely have a better chance to move up,” she says.

Recruiting Top Talent In China Takes a Boss Who Likes to Coach (WSJ)

SHANGHAI — Any company that wants to succeed in China — and the list grows longer every day — needs to understand what matters even more than an understanding of distribution networks and good relationships with government officials: executives on the ground who truly enjoy coaching their employees.

Whether they work in Beijing, Shanghai or Guangzhou, executives at multinationals who stay behind closed doors and rarely offer performance feedback or advice are bound to fail. That’s because the local hires they need to run their offices and plants will be seeking out bosses who will help them advance their careers.

With China’s economy growing so rapidly, multinationals and private and state-run Chinese companies are competing fiercely for talent. Young, educated Chinese from top schools with a few years of work experience often have their pick of entry and midlevel jobs in sales, marketing, finance, government relations and manufacturing.

They can also command much higher salaries now than they could a few years ago, though they’re still paid far less than expats. Money, though, isn’t necessarily their top priority when weighing offers. In a recent study of several dozen Chinese managers placed by Korn Ferry, Grace Cheng, the managing director of the search firm’s Beijing office, says she found that “money is a less important reason to change jobs than the potential to grow and have a close working relationship with an immediate boss.”

James Rice, a Tyson Foods vice president and the company’s general manager in China, understands this sentiment and has made mentoring part of his job. A 16-year veteran in China, he previously worked for Dannon and Kimberly Clark. One of his current sales managers first worked for him as a secretary at Dannon and, with Mr. Rice’s coaching, advanced to management. He quit Dannon when Mr. Rice moved to Tyson last May. “I didn’t want to poach [from Dannon] but he was going to take another job anyway, so I asked him to work for me again,” says Mr. Rice.

A few weeks ago, he recruited a young manager with an MBA degree from the University of North Carolina by promising training and promotion. The manager was weighing another offer from a multinational, and Mr. Rice didn’t have a specific opening for him. But he was determined not to lose the chance to hire him. “He’s very smart and speaks perfect English, and we’re growing by more than 20% a year so it makes sense to hire ahead,” says Mr. Rice, who plans to expand Tyson’s China-based operations through acquisitions. “I pitched him very heavily on what I’d do to work with him and help him grow his career. I told him that for the next 12 months, he’ll be my assistant, going with me wherever I go — and then he’ll get a line position,” Mr. Rice says.

Stella Hou, who manages the compensation measurement practice for Hewitt Associates in China, is often a personal counselor as well as a career coach to her 30 employees. In the U.S. and Europe, “managers don’t feel they should trespass into employees’ personal lives, but Chinese employees often expect their bosses to do that,” she says. She spent hours listening to an employee vent anger and grief when her marriage fell apart.

Young recruits, many of them products of China’s one-child policy, also often require coaching on how to gain independence from their parents. Mr. Rice has had to tell some prospective employees that their parents aren’t welcome to sit in on job interviews. And when an intern in Ms. Hou’s office talked constantly about how much his mother takes care of him, co-workers began counting the number of times he invoked his mother’s name and then subtly suggested he change that habit. “He’d say, ‘my Mommy bought me this shirt,’ or ‘my mommy made me this meal,’ ” says Ms. Hou. “One day he brought her up 25 times.”

She prefers hiring employees whose parents live in provinces far from Shanghai or who went to boarding school at young ages. “They’ve been less pampered” than only children who have had their parents’ and grandparents’ undivided attention, she says.

For their part, Chinese employees, especially those in their 20s and 30s, don’t want to stay in any one job for more than a few years. They are looking for training and frequent promotions, and they’re willing to job hop to advance.

Among the companies that has benefited is Beijing-based Sohu.com, one of China’s main Internet portals. Founded eight years ago, Sohu.com, which now has 1,400 employees, has wooed hundreds of upwardly mobile young Chinese from multinationals. Andy Zhao, a group leader in human resources at the company, formerly worked at McDonald’s, where he advanced from trainee to store manager over a six-year period. But then he quit, because his boss, he says, “was too vague” about his chances for future promotions.

He says he likes Sohu.com’s innovative culture and his “caring bosses,” who encourage him to “make fast changes every day.” But he adds that how long he stays there will depend on “whether I can keep growing and changing.”

This is the first of several columns about managing in China.