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The New Science of Hiring

Care to dramatically enhance your chance of finding great employees? Trade in your gut instincts for a systematic approach to interviewing, testing, and evaluating job candidates.

What was her company missing? Susan Bowman asked herself that as soon as she plopped into her chair at Tri-anim, a medical-supplies distributor in Sylmar, California. It was two and a half years ago. Bowman had just joined the company as head of human resources, and her highest priority was improving the company’s hiring. When she arrived, the HR department was basically shut out of the hiring of salespeople. Bowman wanted to make it more useful, especially after she noticed some hires were fantastic and others were disappointments.

What Tri-anim was missing–and Bowman fortunately recognized this–was something most employers in America have been missing: Conventional job interviews don’t work.

A typical interview–unstructured, rambling, unfocused–tells the interviewer almost nothing about job candidates, other than how they seem during a couple of meetings in a conference room. But what are these people like late at night and under pressure? What motivates them? How smart are they? Have they handled tough projects? Do they prefer working alone or are they better with a team? Regular interviews assess barely any of this, and in fact are miserable predictors of job success. In technical terms, they have a .2 correlation with predicting success.

Discouraging, isn’t it? It would be–except that industrial and organizational psychologists are on the job, seeking the best ways to evaluate job candidates. A focused three-part approach can make the hiring process as standardized and objective as possible–and can help predict the best performers. The system starts with what is called behavioral interviewing, in which candidates are barraged with tough questions about how they’ve handled specific assignments and problems. Bluffing becomes close to impossible, and the process is based on facts, not feelings. Interviewing is followed by two kinds of tests: cognitive tests, which measure intellectual ability, and personality tests, which are now sophisticated enough that companies can directly compare candidates with their top performers. The third step is asking candidates to do tasks like the ones they’d do on the job.

Most employers will recite over and over that people are the secret to their success–and given that turnover costs about 1.5 times the salary of the employee who moves on, according to PricewaterhouseCoopers, they’d better mean it. But it’s astounding how few companies bother with more than improvised, all-but-meaningless interviews to hire their people. “This is a topic that’s been researched to death by the field of industrial and organizational psychology,” says Peter Cappelli, management professor and director of the center for human resources at the Wharton School of the University of Pennsylvania. “The amazing thing is how few companies take this seriously. It’s kind of mind-boggling that they would undertake such huge investments and not pay attention to what we know about how to pick out the people who are going to be best.”

Susan Bowman had been studying some of this research. She was pleased to see that Tri-anim had been using the testing company PSI to assess candidates for some positions. She was less pleased that the test criteria hadn’t been updated in six years and that some of the company’s hiring managers didn’t use the tests. Bowman immediately had PSI reassess the best and worst performers in a number of areas and develop profiles of the top performers. The goal is to compare candidates with the ideal. Tri-anim salespeople, for example, need to be not just energetic and detail-oriented (pretty common in salespeople) but also unusually independent: They spend a lot of time alone.

Bowman began requiring the PSI assessments as a last step in the managerial, IT, and sales hiring processes. They’ve already turned up surprising results. Recently, a recruiter and a manager were disagreeing over two candidates for a position–until the PSI reports came back. “The results were really staggeringly different. It was a combination of not only skill sets, but that one individual’s people skills were so much lower than the manager had anticipated and the other candidate scored much higher,” Bowman says.

She has now trained all of Tri-anim’s hiring managers in behavioral interviews. “Structured interviews with behaviorally based questions really allow us to drill down,” she says. In a daylong session, the managers learned the tenets of behavioral interviews and practiced asking open-ended questions. Though she doesn’t use work assessments–and that could increase the company’s hiring success even further–these two steps paint rich, objective portraits of candidates. Even the sales hiring managers, who didn’t want to abandon their random interviewing tactics, have become believers as turnover has dropped. “We all want to hire the best,” Bowman says. “This gives really good, objective information that allows the manager to take the halo off the applicant.”

Step 1

In which the bored interviewer turns intrepid interrogator
Other than people’s wan complexions beneath fluorescent office lights, there’s not much that’s consistent in typical job interviews. Topics discussed completely depend on the interviewer, who might spend an hour discussing a candidate’s alma mater, the recent weather, or even himself. He could dismiss the candidate before she’s even started speaking because she’s overweight or overdressed, or he could lose focus because he’s having a rotten day. Afterward, the interviewer is left with a resume and a vague sense of…how the candidate acts during an interview. Is she qualified? Dunno, but her resume looks nice. Would she be good at the job? Well, she likes to sail, which is fun.

.2 Correlation between conventional interviewing and successful hiringAs psychologists have pointed out, traditional interviews produce a subjective, acutely narrow view of a job candidate. That view is likely biased–studies have shown interviewers tend to prefer candidates similar to them, judge candidates on fewer criteria than they think they’re judging them on, and tend to let biases about matters like race and gender get in the way. “Everybody thinks they’re much better interviewers than they are,” says Ben Dattner, a New York City industrial and organizational psychologist.

Still, the interview is a brilliant tool if you make certain changes to it. Behavioral interviews have almost triple the correlation of conventional interviews with job success. (To gauge if a hire is successful, academics use measures like the dollar value of an employee’s contribution to the company, his or her relative share in overall output, and later performance reviews, promotions, and raises.) Behavioral interviewing involves, by definition, a group of interviewers defining qualities needed for a job, asking candidates to give past examples of how they’ve demonstrated those qualities, asking the same questions of each candidate, and taking notes throughout. The premise is that what someone has done in past jobs is a superior indicator of what he or she will do in future jobs. It’s the same idea behind checking references.

To see how structured interviews work, take a look at Hope Lumber & Supply, where HR chief Bill Vogt credits much of his company’s growth to behavioral interviewing. Hope, which is based in Tulsa, brings in $1.2 billion a year selling building supplies to contractors. Eight years ago, when the company was making a fifth of that, Vogt and the owners predicted, correctly, that the housing market was about to surge. If they hired the right managers, they could ride that wave.

Following behavioral-interviewing maxims, Vogt starts by talking to people intimate with the job and deciding what qualities are necessary for it. He has a standard template for what he wants in managers: leadership, a drive to make money for the company and for themselves, ambition, and past operational responsibility. Depending on the challenges of the specific business unit, he’ll alter the template.

Then he comes up with open-ended questions that get at the desired qualities. Behavioral interviews use questions that are rooted in the past–“Tell me about a time when”–rather than hypotheticals–“What would you do if?” Vogt digs deep into his candidates’ work experience. “I get into the current operation,” he says. “What did you inherit? What were the sales margins, accounts payable, percent current status, inventory like? What did you do with that, what did you achieve? Clearly, we’re looking for achievers and winners and people very knowledgeable of their operation.” Specific questions like these, in addition to assessing candidates’ skills, combat resume fraud–it’s pretty difficult to lie about sales margins and inventory turns.

Ideally, a team of people will meet with the candidate. That minimizes the importance of any one person’s reaction, good or bad. Vogt arranges a panel interview for general questions, and then sets up one-on-one interviews focused on specific areas. Vogt asks about EEOC compliance and OSHA incidents; the CFO asks about accounting details; the COO asks logistics questions. In any behavioral interview, questions should be job-related, to keep the interview relevant and to avoid discrimination complaints. To the extent possible, every candidate should be asked the same questions. Interviewers should take notes, and should get together to discuss their views just after the candidate leaves.

Step 2

In which the candidate relives college-entrance tests
As helpful as behavioral interviews are, they’re even more effective when combined with employment tests, many of which are now administered online. These are given to candidates to assess either cognitive abilities (cognitive tests are filled with SAT-like verbal and math questions) or personality traits (personality tests include preferential questions like “Would you rather spend a night at home alone than go to a crowded party?” or biographical questions like “Were you a class officer in high school?”). While cognitive tests have a slightly closer correlation with job success, personality tests are useful both as a basis for interview questions and for subsequent development. For the best results, companies should use both sorts of tests or a single test that combines the two elements. (For a roster of tests, see “Choose Your Weapon”.)

Many testing companies today can do impressive comparisons of candidates against existing employees–the goal being to essentially clone top performers. “The assessments allow you to really identify what is different between our stars and our slugs,” says James Hazen, an organizational psychologist and the owner of Applied Behavioral Insights, a consulting firm based in Wexford, Pennsylvania. Hazen uses several tests with his clients.

2,500 Number of cognitive and personality tests on the marketAssessments can turn up some fascinating findings. Dayton Freight Lines, a trucking company based in Dayton, Ohio, had been having trouble with drivers. Customers reported that some drivers were rude. Some drivers were complaining over their CB radios. Some workers’ productivity was falling, or they were late on their deliveries. Denise Noel, the director of quality at Dayton Freight, was stumped. These drivers all had good qualifications and had interviewed well, yet she saw no way to predict who would be an outstanding performer on the road. Finally she brought in a company called Hogan Assessment Systems and had the company present its extensive research on truck drivers.

Noel had assumed all truck drivers were similar. But Hogan had found two distinct truck-driver profiles. The top city performers are social and gregarious, great with customers–which makes sense, because they pick up and drop off multiple times a day. The best line-haul drivers are quiet and introspective–which is good for people who never see a customer. Noel has adjusted her hiring now, having candidates take the Hogan assessment to find the best job for them. Turnover for drivers has fallen to 22 percent (the industry average is 116 percent). “You just think a driver is a driver, and that’s not true,” Noel says. “We just didn’t look at that part of the hiring process enough.”

Discussing the results of assessment tests with candidates–or even giving them the full report–is increasingly popular. “The trend has really been to lay it all on the table between the second and third interviews,” says James Hazen. This gives candidates the chance to explain themselves, gives the interviewer a chance to address weak spots, and, if someone is hired, points out ways he or she might best be managed.

There are, by some estimates, 2,500 employment tests on the market. One of the biggest mistakes companies make is using the wrong test. A classic example is the Myers-Briggs Type Indicator, that ubiquitous test that sorts people into 16 personality categories. Myers-Briggs, a test created by a Pennsylvania woman who was fascinated by how her merry personality differed from that of her straightforward husband, has a weak record of predicting job success. Indeed, its publisher warns that “It is unethical and in many cases illegal to require job applicants to take the Indicator if the results will be used to screen out applicants.”

With so many tests available, it’s not a surprise that employers use tests meant for other purposes, like Myers-Briggs (which is fine, by the way, for employee development), or even design their own tests. But choosing the wrong one can mean dismissing qualified candidates and even getting sued for discrimination. Employers need to know whether a test is appropriate for hiring, what it measures, and how it’s designed, along with making sure it’s legal. Psychologists evaluate a psychological test by two measures, called reliability and validity. Reliability examines whether items that supposedly measure the same thing (agreeableness, say, or conscientiousness) correlate highly with one another. Validity asks, in this case, for proof that scores on tests are related to success in specific jobs. “If you go out on the Net and look at the hundreds of tests out there, a very small percentage have validity data,” says Seymour Adler, a senior vice president at Aon Consulting and a teacher of organizational psychology at New York University.

Recent psychological research supports going beyond validity and reliability data. First, both for legal purposes and to ensure usefulness, make certain the test is designed for selecting–as distinct from developing or training–employees. It should be created or adapted for the workplace, not for clinical or medical diagnosis. Pre-employment tests are more predictive when they compare an individual’s score against a group (they use “normative” scales, in the lexicon) instead of just presenting it on its own (“ipsative” scales). For the best results, too, employers should continue to evaluate and revalidate the tests within their companies to make sure they are still predicting top performers.

A note about testing for hourly employees. There, employers might care most about who’s punctual and honest. Rock Bottom Restaurants, a 29-store chain based in Louisville, Colorado, switched three years ago from a pencil-and-paper application for its hourly employees to a test from Unicru. (Kenexa and PreVisor are two other assessment companies focusing on entry-level and hourly applicants.) For waiters, it tests for sociability and team orientation; for the back of the house, it asks applicants whether they’ve worked in on-their-feet jobs before; for all job candidates, it looks at integrity. Applicants in each pool–cooks, bartenders, and so on–are ranked according to their assessment scores, which gives the Rock Bottom management a good starting point. “It’s not 100 percent predictive, and that’s why we interview people, but it’s at least an indicator,” says Ted Williams, senior vice president of the brewery division at Rock Bottom. Rock Bottom’s turnover for its 6,000 hourly employees has dropped by 20 percent, which Williams thinks is largely because of the system.

Step 3

In which the process starts to imitate finding World War II spies
In 1943, a pretty countryside residence in Fairfax, Virginia, was renamed Station S and repurposed as a testing site for Office of Strategic Services recruits. In an atmosphere of intense secrecy–candidates were stripped of their clothes and given military fatigues, then driven in a windowless van to Fairfax, where they would invent a cover story and fake name–the OSS studied their performance during job simulations. One test had “couriers” giving candidates a map, which they’d need to memorize in eight minutes. Other exercises included interrogating ersatz prisoners of war, devising propaganda plans, and recovering papers from an agent’s room (and, aggravatingly, getting interrupted by a rifle-wielding “German” midway). The tests went on for three and a half days.

Inspired by that work-based approach, corporations such as AT&T starting using assessment centers to select executives. By the late 1950s, the candidate in the gray flannel suit was performing in-basket assessments in which he’d be graded on how he handled a set of letters, papers, tasks, and telephone calls that mimicked what he’d get on the job.

Today’s work samples are essentially updates of those AT&T tests. Work samples are a proven predictor of success and can be simple to arrange. A company can design its own by laying out the criteria for a job and asking a candidate to perform a task based on those criteria. For example: “Explain how you would sell this product to Target, step by step,” or “Tell me how you’d improve these lines of C++ code.”

4 Number of weeks capital H Group dedicates to hiring a single consultantAt Sterling Communications, a technology PR firm in Los Gatos, California, CEO Marianne O’Connor knows her account reps have to be good at understanding technical information, at figuring out how to pitch to a media outlet, and at writing. Logical enough. So she’s started giving job candidates a two-hour test before she even meets with them. It describes a client’s technology, identifies a target publication and its readership, and asks a candidate to distill the salient technical points and write a pitch to the magazine. Three staffers review the pitch, and that decides whether the candidate will get an interview. “If they can’t write in my business, it’s not going to work,” O’Connor says.

On the complicated end of the work-sample spectrum, Seymour Adler, the Aon Consulting psychologist, has created a four-hour online exercise called Leader, which Motorola and other companies use to test would-be executives. Candidates see an in box with e-mails that came in the night before, answer phone calls and listen to voice mails, and have access to reports and research. They’re asked to tackle tasks like ones they would see on the job, such as solving a conflict between two underlings or leading a team of workers in creating a presentation for the CEO. At the end, Adler’s team assesses the candidates on whatever areas the company is curious about–decisiveness, leadership, and so forth–and issues a report to the company. A company called Development Dimensions International offers similar exercises; these take place at one of its 75 assessment centers rather than online. Half-day and full-day job simulations cost from $4,000 to $12,000.

And finally…

Put it all together– without riling your candidates
Dan Weinfurter runs Capital H Group, a human resources consulting firm in Chicago, though he’s not an HR guy but an entrepreneur at heart. He founded the accounting and consulting firm Parson Group, which hit No. 1 on the Inc. 500 in 2000 with a four-year growth rate of 27,992 percent, and sold it four years ago for $55 million. Before that, he was second in command at Alternative Resources, an IT staffing company that was a two-time Inc. 500 honoree. For all he knew about running a company, however, Weinfurter came to the conclusion that he didn’t know much about hiring. “I thought I was pretty good at interviewing,” he says, “but I was no better, and maybe was worse, than other people. If you’re just going through it and trying to guess, you’ll guess right some of the time. But you won’t be able to guess right often enough to grow a business from scratch.”

So at Capital H, he unleashed his on-staff psychologists, who created a hiring system that’s a textbook example of the latest hiring research. Let’s say Capital H has an opening for a consultant. A group of candidates are interviewed by telephone by the HR manager (or by Weinfurter himself, if the position is very senior), and candidates with appropriate skills and backgrounds are then passed to a local office to meet with local executives. He or she takes the Watson-Glaser Critical Thinking Appraisal, a popular and well-validated cognitive-ability test, and the Devine Inventory, which measures the applicant’s traits and tendencies against those of existing Capital H consultants. (See “Let’s Turn the Tables” for a sample of questions from Watson-Glaser.) About one in four candidates are then flown to Chicago headquarters, where they spend a full day in behavioral interviews with multiple executives. Finally, applicants are asked to choose a presentation they’ve done in the past and give that to a group of Capital H execs back at the local office in a work-sample exercise. The executives discuss the candidates until they reach consensus.

Weinfurter figures he spends up to four weeks, and tons of his workers’ billable hours, per interview. But he estimates the cost of hiring a bad consultant can be in the millions, considering not just salary but also missed sales and lost clients. “I think the hiring process is the most important process in business, but it’s probably the least disciplined in terms of how it’s executed across American business,” he says.

People who study hiring, and business owners who are passionate about the subject, love to see systems like Capital H’s. Candidates may not feel the same way. Certainly you’ll have to make concessions in some cases–say you’re trying to recruit a CFO from a rival company. “If they’ve already done a job like this, what’s the point of the test? It’s not obvious you want to give this to everyone and for every job,” Peter Cappelli at Wharton notes. In every case, candidates will have a better attitude toward the process, and the company, if they believe that the hiring methods are respectful, fair, and smart. So use appropriate cognitive tests–don’t ask accountants basic math questions. Use only tests designed for the workplace, so that the questions clearly deal with business situations and seem relevant. And explain why you’re adopting an approach that to some candidates will seem overwrought: to be fair and quantitative.

There will always be skeptics about this approach to hiring, people who believe their gut tells them more than any structured interview or test could. And while Bill Vogt or Denise Noel or Dan Weinfurter could offer testimonials about the new science of hiring, the point is not that this system has worked in a handful of cases. It’s that hundreds of studies have confirmed that testing and structured interviews do a much better job at finding good workers than do regular interviews. Given that, the gut-feel proponents start to seem like people who eschew antibiotics in favor of good old-fashioned bloodletting.

Maybe people don’t like to believe that something as crucial to a business as hiring can be reduced to a series of processes. After all, we rely on feeling and judgment to get through our lives, whether to fall in love, keep safe on dark streets, or assess business partners. This science-based approach isn’t perfect. It won’t anoint every superstar, and it won’t bar the door to all of the mediocre players. What it will do is give employers a fuller, more balanced, and fairer view of candidates, and give them a much better shot at hiring the best people. It’s still up to employers to make the call on whether to hire or to pass, and that’s where feeling and judgment still play a part. But that part now comes after employers have gathered all of the facts.

Stephanie Clifford is a staff writer.

IBM eyes China expansion amid strong growth

IBM, the world’s biggest computer-services firm, said on Wednesday it could open four offices annually in second-tier Chinese cities in coming years to take advantage of robust growth and a deep talent pool.

Any expansion would come after IBM’s Asia-Pacific office completed its move to Shanghai from Tokyo this year, attracted by vibrant growth and deep talent pools in China.

The move also brought the company closer to India, IBM’s fastest growing market.

“We set up four new offices last year,” Michael Cannon-Brookes, vice president for business development in China and India, told Reuters on Wednesday.

“And that pace is sustainable in the near term.”

IBM, based in Armonk, N.Y., had 22 offices in China at the end of last year. It employs 43,000 staff in India, the center of the world’s software services industry, and 7,300 in China, the world’s manufacturing hub.

“That’s why I’m in Shanghai,” said Cannon-Brookes.

IBM’s business in India grew 61 percent in the first quarter from a year earlier as telecoms, banking, insurance and services sectors bought computer hardware and services to spur expansion.

Its revenue in China rose 15 percent. The company did not give sales figures for individual countries, he said.

IBM, which derives about half its revenue from information technology consulting and outsourcing, has made India a global delivery hub for software needs and client services.

Finding talent challenging for China tech firms

By: Steven Schwankert

Tao Sixuan sighed when asked about hiring people for her start-up, Beijing Rose Technology Ltd. “It took a lot longer than I expected, to say the least,” she said, recounting difficulties finding staff to perform basic tasks such as Web design with hosting and back-end support.

“One girl wanted 5,000 renminbi (US$627) per month as a personal assistant–and I had to show her how to use the fax machine,” said Tao, who passed on the interviewee. Someone at that level would normally receive a salary of about 2,000 renminbi per month.

Technology industry employers face a number of problems finding good workers in China, including the spoiled, “Little Emperor,” attitude among young people in many parts of the country, a by-product of the government’s one-child policy.

Raised as only children under China’s population control policy, they are seen as spoiled, lacking any practical experience, and unwilling to endure even basic work-related discomforts such as long commutes or occasional overtime, executives say.

“The attitude is ‘me, me, me, me… and now,'” said Cyrill Eltschinger, chief executive officer of Beijing-based Information Technology United Corp. (I.T. United), a software development outsourcing firm. Eltschinger referred to the attitude of many entry-level employees, who, unlike some of their Western counterparts, couldn’t care less about non-salary benefits like retirement packages.

Other serious issues include a lack of skills and creativity, breaches of business ethics, and a dearth of understanding of how to function in a Western or other type of multi-cultural work environment.

Unlike their parents, who often spent their entire lives at a single employer, regular job changes in China’s tech sector are common enough that spending even two years at one position or company can be seen as too long. Demand for workers is so high that employees regularly seek higher bidders for their services, one reason they change jobs frequently.

Finding workers with basic IT skills is not a big problem for companies in need, but asking them to do more can be difficult.

“If you need someone who understands and can use the software or hardware, that’s no problem,” said Tao. “But if you need them to do something with it on their own, something creative, that’s entirely different.”

Several employers interviewed for this article complained about workers who show up completely unprepared for interviews, who start off by asking questions about what the company does and what the job entails.

“Not so much now, but earlier we got applicants who never looked at our Web site, never Googled us, and came in without the slightest inkling of who we are or what we do,” said Sam Flemming, chief executive officer of Shanghai-based CIC Data LLC, which monitors Internet-based public opinion via bulletin boards and blogs.

Business ethics have also become a major hiring concern, with everything from theft of intellectual property all the way up to more enterprising workers forming their own companies based around their employer’s infrastructure.

One technology executive in Beijing, who spoke on condition of anonymity because of a pending legal investigation, told of an employee he just fired this week.

“He had a full-time employment contract with another company while working full-time for us,” said the executive, adding that the man, “registered with our company using his Chinese ID card. He never told us he was a Canadian citizen.”

For foreign companies, hiring workers in China can be particularly difficult due to language and cultural barriers.

Offshore companies often find plenty of talented IT workers in China but face difficulties finding such talented workers who also have excellent English or Japanese communication skills, Eltschinger said. While language skills are improving, hiring people who understand the needs of Western or foreign clients, what he called a “cultural market perspective,” is still difficult, he said.

Eltschinger said retaining people is also a major challenge for small companies. Brand-name corporations carry greater prestige, and therefore give “face” to the people who work for them. As such, smaller firms have a tougher time holding onto employees for periods beyond two years, even with incentives such as advancement and training.

But being a foreign company with a big name can also work against an employer. When one candidate requested a salary four times more than his previous position, Eltschinger asked why he felt he deserved such an increase. “Because you’re a foreign company. You should pay more,” was the reply.

China funds scramble for pros

HONG KONG/SHANGHAI (Reuters) — Poaching and job hopping is rampant in China’s $64 billion fund industry, making it a struggle to hire and retain ace money managers.

With markets rebounding from a four-year slump and money pouring in, analysts say salaries are jumping to Hong Kong levels while the shortage of fund managers is likely to last for at least the next few years.

“Everyone is screaming for better professionals. What has happened is that there’s been serious poaching between the fund managers,” said Joseph Ngai, an associate principal with management consultants McKinsey & Co. in Hong Kong.

“Managers have told us they’ve had a lot of their lower level staff poached to fill senior positions at other funds, which they are clearly not qualified for. But for lack of better talent right now, there’s nothing they can do about it.”

A Chinese fund manager, on average, will run a fund for just about one year, with more than 30 percent of funds managed by one manager for less than half a year, according to a recent survey conducted by the official Securities Times.

“Every Chinese fund house is struggling to obtain and retain skilled fund managers. The fund industry is a very young industry in China, and we did not have proper training programs to keep up with the demand,” said Jeanne Zhen, an investment consultant with Watson Wyatt.

“That’s why you’ve seen a lot of joint ventures in the fund management industry, because the government realized the shortage of skills.”

Pay nears Hong Kong levels
China now has more than 20 joint ventures with global fund management firms, which are keen to lure China’s $2 trillion in personal savings into fee-rich products such as mutual funds.

While the foreign players have brought much-needed expertise, industry watchers said their deep pockets have also helped fuel turnover and drive up salaries.

“(Pay packages) are reaching Hong Kong levels at this point. For the joint venture mutual fund companies, the joint venture asset management companies, they’re definitely getting close to Hong Kong territory,” said a Hong Kong-based partner with an executive recruitment firm.

“The local firms are no dummies either. They know what it takes to keep and attract good quality people.”

Industry sources said a junior manager at a mid-level Hong Kong firm could make from $130,000 to $190,000, while a chief investment officer could make more than $1 million. But a pay package of $200,000 to $400,000 is typical, they said.

Analysts said rising salaries will eventually curb the shortages as financial professionals are lured away from industries such as insurance, but the process will take time.

Fast growth
The fund industry’s overall outlook is bright, with assets from both mutual funds and pension funds likely to reach almost $1 trillion within a decade, said McKinsey’s Ngai.

“On the talent pool catching up, to be honest, we’re not as worried because it’s proven to be a very attractive industry,” he said.

“The talent imbalance will be there for a few years. But we think it will get to more of a state of equilibrium given another three years or so.”

The mainland Chinese fund industry had 54 firms managing 511.4 billion yuan ($64.4 billion) in assets at the end of the first quarter, according to data from regulators.

These include joint ventures with global fund powerhouses such as UBS AG, JPMorgan Chase & Co., and HSBC Holdings Plc.

While small when compared with most developed markets, the industry has made a huge increase from 1998, when six firms managed just 10.74 billion yuan ($1.35 billion).

The rapid growth has put fund management talent at a premium, and spurred many managers to jump to larger state lenders and foreign brand-backed fund companies.

Industry sources cite the case of Merchants Fund manager Du Haitao, who left for larger rival ICBC Credit Suisse Fund in the first half of this year.

“The turnover in China has been relatively higher than at Western firms,” said Frank Yao, executive vice president with Huaan Fund Management Co. Ltd. in Shanghai.

“In some Chinese fund firms, a fund manager could only work for up to half a year and then he or she hopped to a rival firm,” added Yao, whose firm manages nearly 40 billion yuan.

Watch out India! China wants to be outsourcing powerhouse

Already known as the world’s factory floor, China now wants to turn into an international outsourcing powerhouse, a report said Friday, a move which could challenge India’s prominence in the industry.
Outsourcing will become a new area of foreign investment for the country and China will encourage multinationals to outsource from here, the official Xinhua news agency quoted Vice Premier Wu Yi saying at a forum in the southeastern city of Xiamen.

China, already a favorite with multinationals for manufacturing and research and development would make a snug fit for outsourcing services, Wu said.

With four million graduates entering the workforce every year China offers a huge pool of talent for high-end industry outsourcing, she said.

China wants to restructure its low-end manufacturing economy by investing in services, outsourcing, high-end manufacturing and Research and Development services, Wu said.

India, the global leader in outsourcing services such as software and call centers, employs about 350,000 people in an industry that earned US$6.7 billion in the year ended March 2005.

However, rising costs could threaten India’s headline position as major IT groups such as Apple Computer and software maker Pervasive, have joined Anglo-German Powergen in closing operations in technology hub Bangalore.

Separately, the Indian science minister said in Beijing on Friday that India and China plan to set up a Cabinet level body to pursue joint technology development amid rapid growth in trade between the former Asian adversaries.

New Delhi also is looking to China as a market for farm exports and a source of investment for infrastructure projects, said Indian Science and Technology Minister Kapil Sibal.

“From the Indian standpoint, China will be our biggest partner in years to come,” said Sibal, who was on a five-day visit to the Chinese capital.

Sibal said he signed a memorandum of understanding Thursday with his Chinese counterpart, Wu Guanhua, to set up a committee to promote joint research. He said a formal agreement is expected to be signed when Chinese President Hu Jintao visits New Delhi in November.

Under the agreement, the two sides will create a “road map” for joint research on high-tech projects and on solutions to common problems facing their vast, poor populations, Sibal said.

“If you were to marry China’s hardware with Indian software, we could make goods for the international market that are high in quality and low in cost,” he said at a news conference. “This is an ideal relationship that we can nurture for the future.”

Sibal’s visit coincided with a trade show in Beijing by 48 Indian companies, ranging from biotechnology and electronics firms to makers of textiles and machine parts.

The minister said the two governments also hope to collaborate on solving environmental and other problems where he said India and China have unique experience.

China faces a critical talent shortage

VANCOUVER – Canadian companies doing business in China are having trouble finding people – the right people – in the world’s most populous country.

As multinational corporations race to set up shop in the economic powerhouse, China’s supply of experienced, English-speaking workers is rapidly dwindling.

“There is intense competition for well-educated, English-speaking, professional staff who have experience working with multinational companies,” said Diana Barkley, director of public affairs for Vancouver-based Methanex Corp.

Partly to avoid that problem, Methanex, the world’s biggest methanol producer, decided not to establish its Asia-Pacific headquarters in mainland hot spots such as Beijing and Shanghai when it moved from New Zealand earlier this year.

The company maintains a small marketing office of three workers in Shanghai, but it chose, instead, to base its regional head office in the former British colony Hong Kong, where the pool of talent is wider. ”When we chose to relocate our Asia-Pacific logistics office that was, in fact, one of many criteria we looked at,” Barkley said.

Despite a population of more than a billion, China is facing a critical talent shortage, according to a report released last month by the international employment services company Manpower Inc.

Managers and executives are in greatest demand, the report, titled The China Talent Paradox, stated.

Older managers arising from China’s Cultural Revolution lack the education and training needed to work as senior managers for foreign-based companies, while recent university graduates lack management experience, it said.

Most Chinese employees also have low English-language skills, and those who do meet companies’ standards for high-level positions tend to be difficult to retain, especially when they’re presented with higher salaries, career advancement opportunities and benefits by competing firms.

Although Chinese students and workers recognize the need to learn English, the shortage of fluent English-speakers is “still a very big issue,” said Vincent Wong, president of Richmond, B.C.-based ACT360 Solutions Ltd., which markets its language-skills testing software to universities and companies in China.

Most university graduates have good English reading and writing skills, he said, but their ability to speak the language is often poor.

“Even in some of our own dealings there, the English standard isn’t as fluent as needed for high-level business discussions,” Wong said.

With the exception of some of the “more progressive” multi-national companies in China, most business operations there don’t provide internal corporate training, leaving it up to employees to learn English themselves, he said.

But, in light of the strong competition for talent, Wong said he expects more companies in China will start offering language training for their staff.

According to the Manpower report, the number of university graduates in China is expected to increase by 22 per cent in 2006 to 4.1 million, which will add to the pool of educated potential employees.

Even so, demand is outpacing supply, and the report estimated it will still take six to eight years before graduates gain sufficient work experience to ease the current competition for mid-level and senior managers.

In a survey of 141 companies, Manpower found two in every five are struggling to fill senior management positions in China.

Manpower’s spokeswoman Britt Zarling said recruiting and retaining qualified staff can be even more of a problem for small and mid-sized businesses.

Nearly 75 per cent out of more than 300 Chinese job candidates surveyed by Manpower said they would prefer to work for a wholly owned foreign company rather than a joint-venture or domestic Chinese firm because they tend to offer higher wages, and better training and working conditions.

But with large multinational corporations clamoring for the best workers, the competition among smaller foreign companies is all the greater, Zarling said.

In the report, Manpower noted China’s talent shortage deals a “quadruple blow” for many companies. They aren’t able to quickly jump on growth opportunities because they can’t recruit workers needed to expand their businesses; they face higher attrition rates as staff defect to other companies; they are forced to replace people that have significant knowledge about their products and services; and they are distracted from their core business while they train new employees to replace those leaving.

As well, higher labour costs boosted by the rising demand for trained professionals is squeezing companies’ margins, the report added.

Still, Manpower said, foreign-based companies find it more beneficial to hire local Chinese employees, rather than bring in expatriate managers.

“Local managers have an advantage over their western counterparts when it comes to working with their local staff, given cultural considerations,” Zarling wrote in an e-mail.

It’s important for western companies to adapt to the local environment and adopt an insider’s perspective, she said.

“For those hardest-to-fill positions, companies may bring in their foreign managers (expats) to run the business but sooner or later it is likely that they will be replaced by local people,” she added.

And despite rising labour costs, foreign companies still find it more affordable to shell out for local staff than to bring in foreign workers, said Alison Winters, general manager of the Canada China Business Council’s Vancouver office.

Winters said some sources have indicated that companies can, on average, hire five Chinese workers for the same amount of money required to hire a single North American worker.

“They know it’s terribly expensive to hire expats and the expats don’t want to stay that long,” she added.

Winters said that many of council’s member firms have been able to weather the talent shortage in China by building loyalty among their staff over time.

The fundamentals of attracting and retaining employees are the same in China as anywhere else, she said. Employers need to select people that fit well within their company, offer strong leadership, and provide opportunities to move up in the company, as well as bonuses or other incentives.

“It’s not any different from any other country,” she said.

Western companies find China hiring surprisingly tough

PARIS (MarketWatch) — Hubert Giraud of French IT and consulting company Capgemini (12533.FR) never thought hiring people in China, the world’s most populous country, would be so difficult.

As multinationals like Capgemini flood the market looking for skilled workers, they are running up against unforeseen problems. Salaries among qualified workers are rising faster than expected, mid-level managers in their 40s are scarce, education standards are weak and many Chinese say they’d rather work for a local rather than Western company.

Strong competition for experienced employees, the cultural complexities of working in a Western company and the sense that the top positions will always be held by European or U.S. managers push many Chinese workers out of Western companies after only a few years.

“Eighty million people live in this province,” Giraud says, referring to Guangdong in southern China, where Capgemini employs 500 people in its business outsource unit. “When you see that you think you can get anything you want. It’s just not true.”

In a nation of 1.3 billion only 5.2% of the population has a college degree and above, China’s National Bureau of Statistics reported in March. By comparison, roughly 25% of the U.S. population of 298 million have college degrees.

Many multinationals, which spend heavily on training young Chinese graduates to compensate for the educational shortfalls, lose them to local companies after a few years because young Chinese perceive that opportunities for career development and promotion are greater.

In China as well as rapidly developing economies like India, it isn’t unusual for Western companies to lead investment and import their own educational standards. What surprises some companies are the lengths to which they have to go to train young Chinese, as opposed to Indians who generally have workable English.

It’s not uncommon, managers interviewed for this article say, for a company to lose a third of its workforce in a year. Heidrick and Struggles, a headhunting firm, said in a July study that “talented managers” in China change jobs every 15 months at present.

Heidrick says most companies are happy if they can limit turnover to no more than 15%, particularly in fast-growing industries like technology and telecommunications. Bob Krysiak, STMicroelectronic NV’s (STM) president and general manager for Hong Kong, Taiwan and China, says attrition rates for the company’s China operations range between 12% and 15%.

“China is like the Internet bubble in the U.S. – vibrant and bullish,” says Vincent Gauthier, general manager for Hewitt Associates in Hong Kong. “If you are in your 30s, have English and skills you can walk right out of one job and into another without breaking a sweat. And people do.”

The recent influx of college students to Chinese universities means it is easy to recruit 22-year-olds with no job experience. However, people with even a few years of experience are in deep demand.

The surge in employment opportunities has been driven by China’s entry into the World Trade Organization in 2001, which led to a leap in investment in China. Last year foreign companies invested $60 billion in China from $38 billion in 2000, according to the China’s National Bureau of Statistics.

China’s Ministry of Commerce said in the first four months of 2006 roughly 12,000 new foreign companies began operations in China. Heidrick and Struggles notes that established companies in China, both local and foreign, are rapidly expanding their ranks. Of the companies polled by Heidrick, the number of those with staff of more than 5,000 tripled in the last two years from two to six.
Few companies are backing down from ambitious plans to carve out a corner for themselves in China’s thriving marketplace, despite rising wages and intense competition. That is because most companies see the Chinese market itself as an important source of revenue. According to Heidrick and Struggles, two-thirds of respondents cite selling to China’s 1.3 billion people as the key reason for being in China while setting up operations to outsource goods for the West is a secondary concern.

Both U.S. based and other foreign companies face intense competition for staff and rising salaries to increase their operations. Capgemini, which derives 1% of its revenue from China, is looking to triple its staff in China in the next four to five years to 2000-3000 employees.

STMicro, which draws a quarter of its sales from China, announced last spring it would invest $500 million in a new semiconductor factory. It plans to hire 2,500 across China during next few years.

Meanwhile, General Electric Co. (GE) said it is looking to maintain its annual 10% earnings growth in part by outsourcing to China. At present the company makes about $5 billion in revenue from China and recently Chairman Jeff Immelt said he expects that number to double in the next four to five years. GE employs 13,000 people in China.

The labor shortage, particularly among experienced workers, means companies routinely poach talent from each other, driving up salaries in the process. Hewitt Associates estimates that wages are rising as much as 15% a year for experienced, English-speaking workers, but anecdotal evidence puts the number much higher.

Stefan Dyckerhoff, head of Capgemini’s consulting arm in China, hires first-year consultants for $5,000 a year but bumps their pay up to $35,000 by the third. By comparison the average rural salary in China is $225 annually and the average urban salary is $1,164 according to the China’s National Bureau of Statistics. Dyckerhoff says salary inflation is outpacing what the company charges in consulting fees, though profit is still possible.

STMicro which employs 4,000 people in China, pays a relatively experienced engineer in Shanghai about $40,000 a year, about a third less than an engineer’s salary in Silicon Valley, but not a pittance, the company says.
The problem says STMicro’s Krysiak, is that raising salaries alone doesn’t keep workers. Many are leaving for rising Chinese technology companies or even to become entrepreneurs.

“There is a lot of venture-capital money chasing Chinese enterprises,” he says. “We lose people because some of these guys all want to be part of the next IPO.”

Junwen Mo, a 22-year-old Chinese business student, has an internship at BNP Paribas SA (13110.FR) but says many Chinese want to work for a Chinese company in the long run. “For prestige and personal satisfaction it is better to work for a Chinese company,” he said, adding that foreign companies might pay better salaries but they don’t grant promotions. “If you are ambitious you have to work for a Chinese company after a few years of experience.”

Losing people like Mo is painful for Western companies that have spent both time and money training them.

Although China produces 3.1 million college graduates a year, educational standards are lacking, U.S. consulting firm McKinsey & Co. (MCK.XX) says in a 2005 report. Even engineering students from the most prestigious universities in Beijing receive little practical training in either projects or working with a team. Few speak passable English. As a result McKinsey estimates that only 160,000 engineering graduates a year are suitable to work in multinationals – a pool no larger than the U.K.’s, who’s population is about 60 million.

To compensate for the poor education system companies are investing in training programs to get new recruits up to speed which can add 15% to personnel costs, McKinsey says.

STMicro routinely trains new recruits for six months or more. Teaching English is the biggest problem but the basics of business – everything from marketing to how to say no to your boss – has to be taught.

Steven Shaw, head of Networks for Nokia China (NOK), spends a fifth of his time mentoring Chinese workers.

“We have English classes, technical training classes, lots of training.” Shaw says. “It can be expensive, but it has to be done. It’s one of the most important things to young Chinese. They want skills.”

However, they also want to believe that they can reach the highest echelons of the companies. It’s a message that Western companies are finally getting loud and clear, although finding Chinese managers to head operations is by far the most vexing personnel issue, several managers said.

“Graduate degrees were basically suspended in the late ’60s and ’70s,” says Gauthier, referring to China’s cultural revolution. “The 45-year-old manager who speaks English really isn’t available.”

Nevertheless companies are bending over backward to find Chinese-speaking managers, increasingly poaching talent from firms in Hong Kong, Taiwan or Malaysia.

Capgemini recently hired Chen Bo, the former vice-president of Hewlett-Packard China (HPQ), as chief executive officer of Capgemini China, despite the fact that he doesn’t speak English. Chen works closely with a multilingual assistant.

Nokia, too, has boosted its Chinese representation. Shaw says on his management board two thirds are Chinese nationals.

Other companies are also taking notice. Heidrick and Struggles reported that three-quarters of firms operating in China today have native-born Chinese represented on their management teams, up from half two years ago.
“It’s important for morale to have Chinese managers, either from China, Hong Kong or Taiwan, at the top,” Shaw says. “It is not always the easiest thing to find them.”

(Mimosa Spencer in Paris contributed to this article.)

With boom, China faces work force shortages

In the three years since receiving his engineering degree in Shanghai, Jason Zhang has switched jobs twice and quintupled his salary as overseas companies scour China for professional workers.

“If you have language skills, if you have technical skills, it’s very easy to find a job,” says Zhang, 26, who speaks fluent English and now writes software for International Business Machines. “There are more jobs than even two years ago because of the outsourcing from Europe and the U.S.”

Employers like General Electric, Freshfields Bruckhaus Deringer and Ernst & Young are struggling to find engineers, lawyers and accountants as Chinese universities fail to turn out qualified professionals, especially those who speak English. The shortage is threatening expansion plans and driving up salaries in the world’s fastest-growing major economy.

“We could argue that more than water, energy and infrastructure, talent is the greatest constraint on China’s growth,” said Andrew Grant, who heads the greater China office of McKinsey, a consulting firm that advises two-thirds of the Fortune 1000 companies.

Fewer than 10 percent of Chinese job seekers are qualified for accounting, finance and engineering jobs at overseas companies, according to a November report by McKinsey that was based on interviews with more than 80 human resources officials. Most lack English skills and a “cultural fit,” the report said.

Ernst & Young, which plans to expand its work force in China fivefold to 25,000 in the next decade, has turned down clients because it cannot hire enough accountants, said Anthony Wu, a senior adviser and former chairman of the firm’s China office.

China lifted a one-year ban on share sales this year, and public companies are required to meet international accounting standards by next year, spurring demand for accountants.

The country has 69,000 licensed accountants and needs more than 300,000, said Chen Yugui, secretary general of the Chinese Institute of Certified Public Accountants. China did not have a university major in certified public accounting until 1994.

“The gap between the need and the supply is still huge,” Chen said.

Other professions are suffering, too. Even though a third of China’s university graduates receive engineering degrees, international companies cannot find enough engineers. Many graduates are not qualified because they are steeped in theory and have not learned to handle projects or work in a team, McKinsey said in its report.

Freshfields, a London-based law firm that has offices in 18 countries, is searching for qualified lawyers as it plans to add as many as 65 attorneys in China over the next five years, said Mary Wicks, human resources director for Freshfields in Asia. Freshfields is recruiting lawyers who are fluent in Mandarin and have international law degrees.

China has 120,000 lawyers, or one for every 10,800 people, compared with a ratio of one to 375 in England and Wales.

“Competition is tough,” Wicks said.

Companies are increasing pay and benefits to attract talented workers. The average salary for accountants at firms such as Ernst & Young and Deloitte & Touche Tohmatsu rose 30 percent to $9,000 last year, according to a survey by Mercer Human Resource Consulting, based in New York.

Ernst & Young is offering more vacation time and flexible work schedules, said Catherine Yen, head of human resources for China.

In the first half of this year, average annual wages in urban China rose 14.3 percent from a year earlier to $1,160, the National Bureau of Statistics reported.

Many companies are responding to the shortage by expanding internship programs and sponsoring university training programs.

General Electric has forged relationships with 17 of China’s 50 top universities, including Fudan University in Shanghai and Peking University, said Heather Wang, personnel director for GE in China. “China has a significant imbalance of supply and demand for talents,” Wang said. “It’s still tough to find people who are strong in technical expertise and bilingual.”

The search for talent has led to rapid turnover. Manpower, one of the world’s largest providers of temporary workers, said in June that 24 percent of the more than 300 employees it had surveyed in China planned to leave within the next year.

Ernst & Young, one of the biggest U.S. accounting firms, has watched its own clients lure away auditors.

“Everyone is striving very hard, so they poach,” Wu, the former chairman, said. “Who better to pinch than the auditors working on your company?”

The loss of senior employees is especially costly in China because of the concept of “guanxi,” or relationships based on mutual interests, said Victor Apps, Manulife Financial’s general manager for Asia. Manulife, the biggest Canadian insurer, has 12 offices and 4,500 workers in China, and is preparing to open offices in the cities of Jiaxing and Jiangmen, as well as in Shandong province.

“Guanxi and relationships are very important to business,” Apps said. Workers are the winners in this competition.

Zhang, who has been at IBM for a year, said that his first job at a software developer paid 2,000 yuan, or $251, a month. Within six months, Citibank hired him away for twice as much. Now he earns 10,000 yuan a month.

“For young people today, job security is really not a problem,” Zhang said.

Report: China struggles with people management issues

Author: RP news wires

Despite being the world’s most populous country, filled with people who would prefer to work for foreign companies, multinational corporations operating in China are finding their businesses hindered by a pervasive talent shortage and struggling to retain their management and employees. A new white paper by Manpower Inc., a world leader in the employment services industry, examines this paradox and offers insight and answers to help multinationals improve their talent management strategies in China.

“Ninety percent of the world’s top 500 multinationals have now invested in China, yet many of them are struggling to generate the sales or growth they want because of talent management challenges,” said Jeffrey A. Joerres, chairman and CEO of Manpower Inc. “Recruiting the right people, retaining the best staff and developing leaders of the future are difficult tasks in any market. For foreign companies operating in China, the difficulties are magnified by the talent shortage – particularly of managers and executives – and the difficulty of understanding how to adapt talent management strategies to the country’s unique business culture and values.”

Manpower’s white paper, The China Talent Paradox, offers five practical strategies for multinational corporations to embrace if they want to improve employee attraction, engagement and retention in China:

1) Create a learning organization

2) Appoint competent leaders

3) Establish an appropriate organization and culture for China

4) Provide competitive compensation and benefits packages

5) Select the right people

“It is vital that organizations view these five strategies as a holistic, integrated solution,” said Joerres. “Neglecting even one of the strategies will weaken the solution considerably.”

These five strategies represent the core elements of Manpower’s proprietary Workforce Optimization Model that is used to assist clients in recruiting and retaining permanent employees in China.

Joerres said, “These strategies may seem to be self-explanatory to an HR professional, but it is important to recognize what they actually mean in the work environment in China. Effective talent strategy in China relies heavily on grasping the cultural nuances and leveraging this knowledge.”

“Learning is a priority for Chinese employees because they are acutely aware of the limitations of their educational system and possess a strong desire to continuously acquire marketable skills,” said Lucille Wu, managing director of Manpower China. “Learning has to be embedded into employees’ daily activities so that they learn new skills and gain new experience every single day. Lacking this stimulus, they will leave for another company to find better career development opportunities.”

Previous Manpower research of 33,000 global employers found that vacancies at the manager and executive level are much more difficult to fill in China than in other countries, which has a direct impact on the ability of organizations to grow.

“To fuel the current level of growth that multinationals are experiencing in China, they need to attract and develop competent leaders that can work effectively in the Chinese workplace,” said Wu. “Chinese employees respond best to hands-on leadership and having a role model to demonstrate what is expected of them so that they may replicate their actions. They are also unlikely to tell a manager when they do not understand how to complete their work. This requires a different leadership approach than most Western multinationals expect when they come to China.”

Manpower has found that nearly 75 percent of Chinese employees would prefer to work for wholly owned foreign companies rather than joint venture companies or wholly owned Chinese companies. This is a distinct advantage for foreign multinationals competing for talent in China, yet ironically, retention remains an issue for them.

“In addition to the many multinationals who come to China to set up manufacturing operations, there are also many companies that come to China to market their products and services to Chinese consumers,” said Joerres. “The preference of Chinese workers to join a foreign company underlines the tremendous opportunities for companies that develop the right talent strategies to compete for a bigger slice of the world’s largest consumer market.”

Deloitte plans to increase its numbers in China

Deloitte, one of the world’s four biggest accountancy firms, is planning to beef up its staffing pool in China from the current 6,000 to 9,000 by 2009 to handle its growing business in the country, a top executive said yesterday.

“Currently we have 6,000 professionals in 10 offices in China serving our clients and we expect (the number) to be in the range of 9,000 in 2009,” said Manoj P. Singh, regional chief executive officer for Deloitte Touche Tohmatsu Asia-Pacific region.

“Our presence is sometimes dictated by the needs of our clients,” said Singh, who took the post in 2003.

“Building larger practices on the (Chinese) mainland is part of our growth strategy,” the CEO said.

China is already one of the top eight markets for Deloitte’s global operations as measured by staff numbers, Singh said.

The service firm has seen tremendous growth in China in the past few years thanks to the country’s booming economy, he said, declining to reveal specific revenue figures.

Deloitte achieved aggregate revenue of US$18.2 billion last year, a 10.9 per cent increase over the US$16.4 billion reported the previous year.

“We have been growing at a double-digit rate both in terms of headcount and revenue in China in the last couple of years,” said P. Christopher Lu, regional managing partner.

Singh said the firm’s market share had increased four-fold among the top 100 Chinese companies over the past three years, including not only auditing services but also consulting, tax and other services.

“Our strategy is focusing on building our brand around the transformation of Chinese companies, especially for those top 100 and 200 firms,” Singh said.

He said the services firm is well-positioned to provide auditing, tax and management consulting services to help build domestic enterprises into world-class or Fortune 500 companies.

Deloitte’s existing client base in China is dominated by multinational companies operating in the country, but this varies according to the service.

For example, Lu said, about 70 per cent of its tax customers are multinational companies, while about 65 per cent of its corporate financing customers are foreign firms.

But he said Deloitte is luring more and more Chinese companies.

“We could only achieve our six-year strategy by having the right balance of both local domestic firms and multinational companies and being able to provide valuable services to them,” Singh said, referring to his firm’s ambitious goal to become the best service provider, a roadmap announced three years ago.

The company announced two years ago it would invest US$150 million in China over the next few years, which Singh said “is the biggest and most significant” global investment the firm had ever made.

The investment in recruitment, training and resources is “well on track,” said Singh.

Global CEO Bill Parrett said last year that the firm planned to build China as its second-largest market by 2010 and the largest by 2030.

Source: China Daily