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China-Based Employees Demand More Perks, Better Salaries

By Kathy Chen and Peter Wonacott

From The Wall Street Journal Online

China’s office workers may not know who Dilbert is, but many are feeling the pain of the popular cartoon character who works long hours for a soulless corporation.

And they are starting to fight back.

PricewaterhouseCoopers’ Beijing office recently has seen a rash of resignations in its auditing division, and, in July, a group of senior auditors approached the firm’s partners to complain about what they described as paltry pay and long hours.

“People felt that they were doing a very good job, but their salary increases weren’t ideal,” says one auditor who quit the firm this summer after working there several years, partly because of the long hours. To top it off, he says, even though senior auditors often worked until 1 a.m. or 2 a.m. each night and on weekends, they weren’t eligible for overtime pay (though they could take time off).

PricewaterhouseCoopers quietly settled the dispute by agreeing to pay all of their auditors overtime and to issue annual bonuses early. “We hadn’t done the best job communicating with staff, which happens when we’re so busy,” says Dave McCann, the firm’s partner in charge of human resources in China. “Now we’re starting more communications.”

Problems are brewing in the cubicles at multinationals in China. As business booms, foreign companies are pressuring local employees to be more productive, even as budgets — and salaries — remain tight. The trend coincides with some fundamental changes in China’s white-collar work force: No longer satisfied with just a job at a brand-name foreign firm, many Chinese professionals aspire to more leisure time and other accoutrements of a middle-class lifestyle. They also are showing greater awareness of their legal rights under labor laws.

The result is that labor friction, once confined to factories and unprofitable state enterprises, is seeping into the offices of multinationals in China. “At first, Chinese employees [at these companies] felt the salaries were higher, so they put up with the conditions. But gradually, they have become more and more dissatisfied and want to see improvements,” says Zou Zhen, a division chief at the state-backed All-China Federation of Trade Unions.

Adds Frank Gallo, head of the Beijing office of human-resources consulting firm Watson Wyatt Worldwide, “Companies need to be more conscious of people’s needs.”

A multinational job in China is still much cushier than working for a state-run company. While workers may be under more pressure to perform, monthly salaries are equivalent to $400 for receptionists and $3,500 for engineers, for example. Wages at state-run enterprises usually range from $50 a month to $200, although some are starting to pay more-competitive salaries.

Foreign firms also offer more opportunities to go abroad and to learn modern skills. Meanwhile, many of the former perks offered by state-run employers — job security, shorter hours — are fast disappearing as they, too, come under competitive pressures.

The number of labor disputes is rising, too. Last year, Chinese arbitration authorities heard some 226,000 cases involving more than 800,000 employees, up 23% and 31%, respectively, from 2002. Mary Gallagher, an assistant professor of political science at the University of Michigan, says that while foreign companies prefer to settle disputes internally, they also are seeing a rise in the number of cases.

But some workers are taking their multinational employers to court. Last fall, more than a dozen former managers at MSD China, a joint venture between Merck & Co. and a Chinese pharmaceuticals company, filed suit against the company alleging that they were fired over wrongful charges of misconduct. The firings took place around the time Merck was conducting global layoffs, and the Chinese employees believe the company fired them to avoid paying severance packages.

Alice Chin, MSD’s head of external affairs, says the company terminated certain employees because “they violated the company’s policies and procedures.” She says several cases have been settled through arbitration, while others are pending in China’s arbitration and court systems.

In April two Chinese workers sued Shanghai ADT Facilities Management Co. after they were fired for allegedly breaking company rules. A General Motors Corp. joint venture had hired workers from Shanghai ADT for low-skilled tasks, such as cleaning services. These employees worked at the GM site, but weren’t given health benefits or a work contract, and paychecks were delayed, says Qiu Jie, a director of the Labor Law Aid Center at the East China University of Politics and Law in Shanghai, which advised the employees. The arbitration panel ordered Shanghai ADT to pay them back wages and erase the rule-breaking allegation.

Shanghai ADT, a joint venture between Knight Facilities Management Inc. of Saginaw, Michigan, and two Shanghai companies, including GM’s passenger-car partner, Shanghai Automotive Industry Corp., declined to comment. Shanghai GM said it wasn’t aware of the dispute. Shanghai GM said any such situation would mean it would “take immediate action to demand the supplier provide all the necessary information and labor contracts…to address the issue.”

Some Chinese professionals also are getting riled over the often-huge differences in pay between local and expatriate staff. Under China’s old centrally planned economy, workers were paid roughly the same. These days, pay scales are uneven, and working elbow-to-elbow with highly paid expats stokes resentment, says S. Prakash Sethi, a professor at the City University of New York’s Baruch College who advises multinationals on codes of conduct. He says similar workplace frictions are playing out in other countries where skilled local professionals are in demand, such as India.

In this environment, some trade-union officials see an opening to expand their membership among white-collar workers in foreign companies, one-third of which are unionized. China’s unions fall under the umbrella of the All-China Federation of Trade Unions, which traditionally has been closer to management than workers.

Some multinationals are trying to adjust their policies pre-emptively to meet the changing needs of their workers — and of their own fast-growing operations in China. Merck, which has a female-heavy work force, says it has introduced flextime for working mothers and opportunities for managers to work in the U.S.

PricewaterhouseCoopers, whose annual revenue is growing more than 30%, is revving up hiring and becoming more selective about which projects it takes on. “With our China practice becoming more mature,” says Johnny Chen, partner in charge of the firm’s Beijing office, “we need to focus more on retaining the qualified accountants we have recruited and trained.”

— Kersten Zhang contributed to this article.

Deep Inside China, Expats Struggle to Cope

By James T. Areddy

From The Wall Street Journal Online

CHONGQING, China — As one of Ford Motor Co.’s managers in China, 30-year-old John Larsen is exposing his family to a culture they couldn’t imagine back home in a Michigan suburb.

But when his wife and kids — ages 2, 4 and 6 — moved here last September, they preferred to stay inside a 19th-floor Hilton hotel suite, where the family lived for nine months. The rarity of fair-complexioned, American children on the sidewalks of the gritty industrial city of Chongqing makes the Larsen family a crowd-stopping spectacle.

“It’s not very fun and my kids hate it,” says their mother, Laurel, 31. Over a bowl of her homemade vegetarian chili in the five-star Hilton, the Cincinnati-born woman added, “When we go home and close the door, we feel like we are back in America.”

As corporate ambitions bore deeper into China, foreign companies are sending families to less-developed cities like Chongqing. Such places offer huge, untapped markets for companies. They also provide accelerated career opportunities to young executives eager to punch their ticket on the way to upper management. But the postings can feel like a detour into isolation and culture shock for some families.

Chongqing is a city of 32 million people, but Westerners are still rare here. The city is nearly 900 miles west of Shanghai, and about a decade behind it in terms of economic prosperity. So-called bang-bang men hang out on the streets, hungry to earn a few cents lugging stones, machinery or even garbage on their bamboo poles. Residents walk on sidewalks covered in cooking oil and spittle. Even the weather isn’t a selling point: Fog trapped in by the surrounding mountains creates generally soupy skies, made worse by pollution.

American companies are drawn to cities like Chongqing because they are cheap; the average annual wage here is $1,500, about half of what it is in Shanghai. Merchandisers see markets for all kinds of products. In Chongqing, for example, car ownership is just 1.3 per 100 people, a fifth of the rate in Beijing.

A tall, confident man with wispy brown hair, Mr. Larsen sees many benefits to the move. He likes his job, developing marketing strategy for Ford. He’s glad his children are seeing a different way of life. The private school that the older two kids attend provides an excellent education, he and his wife agree.

Still, the adjustment has been more challenging than they expected. “We thought we would be eating a lot of Chinese food and the kids would be learning Chinese quickly because they’d be immersed,” says Mr. Larsen. So far, that hasn’t happened.

A marble lobby dominated by a waterfall and piano bar makes the Hilton the swankiest address in this part of China. English is the first language and a concierge takes care of smoothing over any rough spots. A blue-lettered “WELCOME” mat marked the entrance to the Larsen’s three-bedroom suite, converted from six guest rooms. It cost $4,300 a month, paid mostly by Ford. When the family needed to step outside, their driver, Jojo, waited in a black Ford Mondeo sedan, provided by the company.

Ford picks up most of the rent for its expatriate employees and encourages them to live in hotels because the conveniences help workers “remain focused on running the business,” says Ron Tyack, a senior Ford executive in China.

Expat perks are being scaled back in cities such as Beijing, Shanghai, Guangzhou and especially Hong Kong, parts of China where rapid development has made it easier for foreigners to adjust. But perks remain a must to lure Americans and their families to cities like Chongqing.

Shanghai and Beijing each have a dozen international schools, many with hundreds of students. Chongqing has one international school, in a converted house, with 40 pupils ages 2 to 17. Ten hospitals in Beijing offer foreign-grade medical care. Chongqing has a single Western-style clinic, located in the Hilton, that rotates a different doctor through every few months. Even breathing is easier in Shanghai. Chongqing has 88 fewer days of good-quality air than Shanghai during the average year, according to Chinese government statistics.

Perhaps most shocking: The Starbucks chain, which boasts nearly 100 coffee shops between Beijing and Shanghai, doesn’t have one in Chongqing.

In recent years, “the demographics of the expats have changed,” says Joseph Verga, a 45-year-old financial controller for Ford, who lives in Chongqing. When he moved here two years ago, “there wasn’t a baby” among his U.S. co-workers, he says.

Shortly after Mr. Verga and his 42-year-old wife Marybeth were dispatched to China, they trekked through Tibet. She filled their apartment with paintings from Vietnam and a clay warrior statue from Xian in western China. But after Ms. Verga became pregnant, she decided she didn’t want to go to a Chinese hospital. So this spring, two months before her due date, she flew home to Detroit to give birth to her son in a U.S. hospital. “There’s not one thing that’s the same,” about Chongqing and the U.S., she says.

Before Ford started making cars here in 2003, the city — familiar overseas as “Chungking” — hadn’t seen so much foreign attention since serving as an allied supply post in World War II. Decaying hillside mansions are a reminder that Chongqing was a capital for the Nationalist government before the civil war that brought communists to power in 1949. Today Chongqing is the main jumping-off point for tourist cruises on the Yangtze River toward the famed Three Gorges Dam.

The government is eager to boost interest in places like Chongqing, which gets just 5% of the $8 billion of foreign direct investment that Shanghai takes in annually.

The first time either of the Larsens saw China was when Ford flew them to Chongqing last summer for a visit after his job offer. The couple, who have been married eight years, realized they would be in for a big change. But there was never really much debate whether he would take the job. Ms. Larsen jokes that she knew that in accepting his marriage proposal she was also agreeing to someday follow him to China.

Her husband caught the China bug after being assigned by the Mormon Church to do missionary work in Taiwan at age 19. While there, he learned to speak and read Chinese. Today he speaks Mandarin Chinese well enough to conduct business meetings. Before moving to China, Ms. Larsen’s international experience consisted of living in London for 18 months and a vacation to Cancún, Mexico.

Like many foreigners in town, Ms. Larsen says she won’t touch Chongqing’s signature cuisine: “huoguo,” or hot pot — a fondue-like dish so loaded with fiery chilies that its aroma seems permanently suspended in Chongqing’s air, along with diesel fumes. Supermarkets feature chicken feet jutting out of crushed ice and slabs of pork dangling from sharp hooks.

Neatly dressed in slacks, a black argyle V-neck and bright white blouse, Ms. Larsen shows off her solution to the food challenge: A closet full of cans, stacked to the ceiling, with labels like Green Giant, Crisco and Hormel — items lugged to Chongqing in suitcases or mailed from overseas. Her birthday present in February was a silver, side-by-side U.S.-sized refrigerator-freezer.

Food is a bargain in Chongqing. Ms. Larsen spends only $50 to $100 a week on groceries, compared with $200 to $300 in Michigan. With the help of her small network of expat wives, she has found one store that has Oreo cookies and another that stocks Fruit Loops cereal and canned refried beans. The children see little in the markets that resembles the food they remember back home. Ms. Larsen says they don’t give her much sass when she tells them: “here’s what you’re eating.”

Recently, the Larsens faced an important new food complication. Four-year-old James was diagnosed with celiac disease during the family’s summer visit back to the U.S. The boy now needs a diet free of gluten, which is found in wheat. In the U.S., Ms. Larsen prepared two cartons of special wheat-free foods to take back to Chongqing.

Entertainment in Chongqing is hard to find, the Larsens say. At a drive-through “safari park,” the children looked through car windows and watched tigers devour live chickens tossed from a ranger’s jeep. Enthusiasm about visiting pandas was marred, Ms. Larsen says, by seeing the zoo’s grubby bathrooms. The Larsens attended a Chinese opera, featuring two actors with painted faces, one in a horse costume. Tickets cost only $2, but the family, unimpressed, left at intermission.

One pastime Ms. Larsen has designed for 2-year-old Eliza is spotting dogs near the Hilton hotel. A look down an alley found no animals one Tuesday. After an hour, the little girl had glimpsed two mutts. “He’s going to his house,” Eliza said as a scruffy brown dog jostled along a sidewalk crowded with scaffolding equipment.

Chinese men and women made way for the tot to amble down on the sidewalk. Nearly everyone reacted to the rare sight of a foreign child, pointing, giggling, staring and sometimes touching her. “Eliza’s kind of like the monkey on show,” her mother said.

Ms. Larsen and her daughter took a route back to the Hilton over a pedestrian bridge, where merchants sell sunglasses, combs and belts. One woman’s habit is to thrust a mirror into the little girl’s hand each time they pass, Ms. Larsen says. She says she feels obligated to buy it, even though she is tiring of the routine. At first, the woman asked only one yuan for a mirror, Ms. Larsen says, but now she charges eight yuan, about 99 cents, for each one.

As Ms. Larsen settled up, a middle-aged man bent down for a closer look at Eliza, while a bang-bang man leaned on his bamboo stick and watched. An elderly passerby gave Eliza’s cheek a quick pinch. Everyone tried to be friendly, but Eliza, unsmiling, said nothing. She kept her head down, eyes fixed on the new mirror.

Foreigners are such a rarity in Chongqing that even Ms. Larsen gawks at times: “There’s a Westerner we don’t know,” she says, on one drive through town. Only about 25 of Ford’s 2,500 employees in Chongqing are foreigners. The Larsens say they know literally every expat family living here.

Ms. Larsen says she hasn’t learned enough Chinese in her two hours of weekly lessons to make even basic points to the family baby sitter. She often calls her husband on the cellphone to seek translation help. Looking over the skyscrapers outside the hotel window, she says, “Real life is happening out there, and I’m not connected.” Even so, she adds, “What would I do out there?”

Her offer to volunteer at an orphanage was turned down, she says. Her major diversion is teaching two Pilates-style exercise classes each week for expat women, plus dance classes for little girls. Instead of paying her, a few dollars are collected per class for a local school for the blind.

A centerpiece of expat social life is a Wednesday “ladies’ lunch,” where funds are raised for the blind school and news is swapped about which store has taco shells or sour cream. The women make visits to the fabric market, using calculators to bargain, then use gestures to show a tailor what they want made.

While she hasn’t made friends with locals, Ms. Larsen says she values her new expat friends. They are people who simply wouldn’t be in her orbit back home, she says, including a woman from Cuba and a woman closer to her mother’s age.

From the Hilton, every morning a white van picked up the older two children, Emma and James, for the 20-minute drive to the place in China they enjoy most: school. Ms. Larsen prizes the 7-to-1 student-teacher ratio at the Yew Chung International School, which Ford covers at an annual cost of $13,000 per child.

National flags wrap along the ceiling of Yew Chung School. Children from a dozen countries sit shoulder-to-shoulder at little desks. Emma’s class groups 5-, 6- and 7-year-olds. She studies Chinese each day and practices with her father at night. She is reading English above her U.S. grade level.

“I think I’m going to be a snob when I go home and walk into the public school,” Ms. Larsen says. “They go a lot faster [here].”

With two years still to go on their assignment, the Larsens recently decided to move out of the Hilton and into a five-bedroom house in a new gated community designed for expatriates. Ford pays almost all of the rent. The couple say they want their kids to have a more “American” experience, in particular a yard to play in and the responsibility to clean it up. There’s also a local pool and a playground in the area.

Mr. Larsen has recently needed to spend part of each week at Ford’s new plant in Nanjing, several hours away by plane, near China’s east coast. Ms. Larsen says his absences sharpen the isolation she feels in the new house, away from the helpful, English-speaking Hilton staff. But she says she accepts that her husband’s new assignment is a sign of his value to Ford.

The Larsens credit life in Chongqing with deepening their family ties. “We have to be friends with each other,” Mr. Larsen says. They have taken trips to Thailand and South Korea, and made plans to visit Bali and Hong Kong’s new Disneyland. Ms. Larsen says she is also trying to get out of urban Chongqing more on weekends, going to places such as parks around the mountainous region.

But they are always aware how far they are from home. Mr. and Ms. Larsen returned from dinner one evening to a find a poem from their 6-year-old daughter Emma, complete with a child’s misspellings, taped to their bed-stand. It read:

Amarica is my place!
I love Amarica.
It was fun.
It was so fun.
I miss it.
I miss my frieds.
I love Amarica.
Amarica was my place and it still is my place.

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.

Developing a Jobs Market In a Fast-Changing China

As chief executive of China’s third-biggest online recruitment company, Liu Hao makes a living off the demand for talented people eager to prosper in the nation’s dynamic economy.

Zhaopin.com Ltd. has 18 offices across the country and more than 1,000 employees. At any given time it typically posts 200,000 to 300,000 jobs, ranging from drivers to salespeople to senior executives. Mr. Liu says that is 10 times the number of offerings in 2002, when he took over Zhaopin, in which he was a major investor.

Both the company, whose name means “recruitment” in Chinese, and the industry are still small. Market-research firm iResearch estimates that China’s online job-recruitment market was worth about 800 million yuan, or about $100 million, last year, and puts Zhaopin’s 2005 revenue at 70 million yuan and its market share by registered users that year at 9.8%. Mr. Liu puts its market share by revenue at 20% to 25%.

But the industry is growing fast. And Zhaopin, which started up in 1994 and now counts such regular clients as the China units of Microsoft, Unilever, Alcatel, BMW and Hitachi, is growing with it. The online recruitment market was up 46% from 2004, iResearch reckons, and Mr. Liu says earnings, which he won’t disclose, are, like his job postings, 10 times what they were in 2002. In April of last year, Monster.com, a major U.S. online recruitment company, spent $50 million to buy 40% of ChinaHR.com, one of Zhaopin’s two larger rivals. (The other is 51job.com.)

Mr. Liu, 37 years old, takes pride in having propelled the company to its current position. His co-investors include the venture-capital arms of computer maker Lenovo Group and Taiwan’s Acer Group. He says Zhaopin could go public, perhaps next year.

But Mr. Liu also takes pride in his own metamorphosis, from Beijing University physics major to Yale University law-school graduate and attorney at New York-based multinational law firm Davis Polk & Wardwell to California venture capitalist to entrepreneur, believing that in the end it’s better to commit to one vision than to make a run at many projects.

Mr. Liu spoke from Beijing with Juying Qin in Hong Kong about that principle and about connecting China’s leaders and workers with jobs in a fast-changing economy.

WSJ: How does Zhaopin.com mediate between prospective employer and job hunter?

Mr. Liu: We usually sign contracts with our clients or the employers. We check the veracity of the company as well as the job positions they want to post. Job hunters can put their own information into our database .

WSJ: Have you ever found your jobs online?

Mr. Liu: Well, no.

WSJ: What was your first job and what was the most important lesson you learned from it?

Mr. Liu: Practicing tax law. I was extremely impressed. The law firm is like a university or a learning machine, passing along knowledge to junior associate lawyers like me. Law students still tend to be less practical, especially Yale law students.

WSJ: Why did you turn from physics student to lawyer to venture capitalist and then to corporate executive?

Mr. Liu: Being a physicist was my childhood dream. But after a few years, I had a lot more discoveries about myself. I call this process rediscovery.

I went to law school not because I wanted to be a professional lawyer but because in law school, students could be exposed a lot more extensively to society. From a venture capitalist to the manager of this company was quite a natural choice for me. I was managing the company at the time as an investor, the company was not doing well, and I thought it was kind of an obligation for me to go in.

Most of my friends were against my choice, in part because they thought the risk was so high. Being a venture capitalist or being a lawyer is really kind of a cushy job. Lawyers do not really take that much risk. You do give advice to your clients, and you do have to make judgment calls, but those judgment calls do not eventually affect you.

To be a lawyer, you need to restrain your passion and be unemotional. To be a manager, you have to have some passion. If you don’t have it, you can’t do it.

Fundamentally I felt like were all kind of passive. In my life, I have always wanted to point to something that I really built.

WSJ: You didn’t go to business school and had no real managing experience before. What made you so confident you could turn this company around?

Mr. Liu: I actually asked myself the same question when I took this position. But I think personality is the most important thing that leads to success. I was always able to manage the transitions well, from physicist to lawyer and then to venture capitalist, so I should be able to manage another transition well.

WSJ: In your industry, are there big differences between China and the rest of the world?

Mr. Liu: The American job market is more like a seller’s market, while China, with a larger labor base, is more like a buyer’s market. But the job market in China is nascent. Fundamentally, its problems reflect the problems stemming from the educational system.

Many fresh college graduates don’t have the skills to cope with real work. They don’t have enough career training. So it can be quite hard for them to find their niches in the first couple of years after graduation.

There are two main problems. First, some people, especially fresh college graduates, make fake résumés by exaggerating their experiences. Second, people change jobs very frequently.

WSJ: Can you describe China’s leadership potential?

Mr. Liu: The quality of managers in China has been improving quite obviously in recent years, but there are still far fewer experienced managers than the market demands. Back in 2000 to 2002, people without much management experience could easily get around by carrying some master-of-business-administration degree from some big-name university like Harvard, although some were really not very capable.

WSJ: What is the most important piece of technology you use?

Mr. Liu: Basically I talk on the cellphone 24 hours a day. Sometimes people call me at 3 a.m., and they don’t even ask whether I was asleep. If I didn’t have a cellphone with me, I would start to worry about what I am missing. This really has become part of my body.

China needs more overseas experience, says Yao

BEIJING (Reuters) – Houston Rockets center Yao Ming believes more of his Chinese team mates need to gain experience abroad for the national team to be competitive at the 2008 Beijing Olympics, state media reported on Tuesday.

China finished a disappointing 11th at the world championships in Japan after being knocked out 95-64 by eventual runners-up Greece last week.

Yao, who averaged a tournament-high 25.3 points and virtually carried China into the second round, told state TV that several of his team mates should join more competitive leagues overseas.

“As the 2008 Olympics are drawing near, we should send abroad the likes of Yi Jianlian and Wang Shipeng as soon as possible in a bid to raise our level in the short term,” the 7ft 5in NBA All-Star center said.

“Even if our basketballers fail to play as regulars, we still could benefit at least from their training. I played as a substitute 10 minutes per game initially, too. It depends on your will and work.”

Yao lamented his team mates’ lack of strength and courage after China crashed out of the worlds, and remarked in media reports last week that Chinese basketball was too inward-looking.

But he conceded it was “impossible” for domestic clubs hungry for national success to send key players to foreign leagues, Xinhua news agency reported.

China’s basketball officials, concerned that foreign careers might interrupt national duty, have also been reluctant to allow young talent to seek their fortunes in overseas leagues.

Yi Jianlian, touted as China’s next Yao Ming and courted by several NBA clubs, declined to enter this year’s NBA draft after China Basketball Association (CBA) Director Li Yuanwei voiced concerns about young Chinese players warming benches in the NBA.

Menk Bateer and Wang Zhizhi, the other two towers in China’s NBA “Great Wall,” were characterized by regular transfers and little game time.

His NBA aspirations clashed with China duties, leading to his sacking after failing to join the national team during the Asian Games in 2002. Wang returned to China earlier this year.

Wang and the rest of Yao’s team mates will return to domestic league clubs for the kickoff of the CBA 2006/2007 season in October, before being called up for November’s Asian Games.

Yao has been exempted from the Asian Games, Xinhua reported.

Large numbers of low quality talent hurt China

Source: CRI
09-14-2006 16:05

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

Editor:Sun Luying

Ping An May Cash in on China Finance Share Craze

A possible $2.5 billion secondary offering bid by the insurance giant highlights how hot the market for mainland financial services remains

The stampede by Chinese financial services players to raise megabucks with initial or secondary stock offerings shows no signs of letting up. China Merchant’s Bank, the nation’s sixth biggest lender, has been overwhelmed by applications from institutional and retail investors for its $2.4 billion initial public offering that will start trade on Sept. 22.

In October, the mainland’s biggest lender, Industrial & Commercial Bank of China (ICBC), hopes to rake in $19 billion in a dual listing of shares in Hong Kong and Shanghai in what will likely be the biggest IPO in history (see BusinessWeek.com, 9/5/06, “China Bank Stocks: What, Me Worry?”).

Now Chinese insurers may be jumping into the act. Ping An Insurance, China’s second biggest life and No. 3 non-life insurance company, may be planning to raise $2.5 billion in a secondary share offering either in Shanghai or Shenzhen during the first half of 2007, according to a report by Bloomberg News. Reached by e-mail, a spokesman for Ping An, which is based in Shenzhen, declined to comment on the report.

EASY MONEY. Given the rapacious appetite for Chinese financial stocks, the odds are pretty good Ping An is taking a serious look at the offering idea. Global and mainland investors just can’t seem to get enough of Chinese bank and financial service shares. Two big, mainland, state-owned banks, China Construction Bank and Bank of China, had little trouble selling a combined $22 billion-plus worth of share offerings over the past year in listings in Hong Kong and Shanghai (see BusinessWeek.com, 5/31/06, “A Golden Age for Chinese Banks”).

Many are betting that China’s stellar growth, burgeoning middle class, and rising disposable incomes will set the stage for the mainland to emerge as one of the most dynamic financial services markets in the 21st century. Meanwhile, Chinese banks and insurers have a choice opportunity to raise a lot of money effortlessly, to grow their businesses, and to hunt for acquisitions.

For instance, China Construction Bank, whose share price has appreciated more than 40% since its IPO last October, announced on Aug. 24 that it will spend $1.24 billion to buy the Hong Kong consumer-banking operations of Bank of America (BAC). Ping An spent more than $600 million in July to buy 89% of Shenzhen Commercial Bank, which will move the insurer into the explosively fast-growing mainland credit card business as well as into commercial banking.

STRONG BALANCE SHEET. Ping An, which is 19.9% owned by HSBC (HBC), is considered a well-managed company by analysts, and has ambitious plans to diversify beyond insurance and into banking, securities, and asset management. It also has a strong balance sheet compared to other Chinese insurers. “Ping An group’s capitalization is strong by domestic standards,” says a recent report by Standard & Poor’s credit analysts Connie Wong and Qiang Liao.

Thanks to robust growth in its core life insurance business, Ping An’s 2006 first-half net income jumped 85% to $524 million. Ping An chairman and Chief Executive Ma Mingzhe has won high marks for recruiting overseas talent and building up a strong brand presence in China. “Half of the company’s high-level management team members are from overseas,” Sun Jianyi, vice-CEO at Ping An, told BusinessWeek in a recent interview.

Ping An ranked No. 6 in a BusinessWeek.com and Interbrand Asia survey of China’s top 20 brands published last month (see BusinessWeek.com, 8/28/06, “BW’s 20 Best Chinese Brands”). That kind of name recognition will come in handy should the Chinese insurer ask mainlanders to pony up a cool $2.5 billion next year.

Korn/Ferry Profit Rises 28% on Strong Demand

Executive recruiter Korn/Ferry International reported higher quarterly profit on strong global demand for senior-level staff.

Net earnings rose 28% to $14.8 million, or 31 cents a share, in its fiscal first quarter, from $11.6 million, or 27 cents, a year earlier.

Analysts, on average, expected profit of 30 cents a share, according to Reuters Estimates.

Total sales were up 25% to $161 million, compared with Wall Street estimates of $149 million in revenue. Fee revenue was $153 million, up 25% from a year earlier.

The company, which also provides leadership development services, won more search engagements and charged higher fees, citing continued global economic expansion for the improved results. It also said clients were focusing as much on retention and development of their workforces as on recruitment.

Los Angeles-based Korn/Ferry said it expected second-quarter earnings of 28 cents to 32 cents a share, compared with Wall Street forecasts of 31 cents. It estimated second-quarter fee revenue of $147 million to $157 million.

Its shares gained 27 cents at $20.19.

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.