Just as demand for Chinese assembly line workers has driven up wages and manufacturing costs, so demand for Chinese managers is creating a fiercely competitive market for their more expensive services. This is a logical outgrowth of both the Chinese economy's expansion and of western firms' desire to open both manufacturing export platforms and businesses that sell to China's own consumers.
The change for Chinese companies is that local managers now perceive the opportunities at home grown companies to be equal or superior to those of foreign firms, which used to enjoy more exalted status. For foreign firms this is an added cost of doing business that may result in slowing investment as unemployment in western countries offers experienced talent for relatively less compensation. From a cultural standpoint, this may also bode well for foreign competitors as Chinese managers with a taste for western compensation and benefits also adopt western attitudes towards loyalty so that these foreign companies begin to learn from Chinese managers eventually defecting to their ranks. However the trend plays out, this signals greater convergence of both talent and strategy.
Dana Mattioli reports in the Wall Street Journal:
"As foreign companies increase their presence in China, some are finding that local companies' growing success is making it harder to attract Chinese managers.
In the past, foreign or multinational companies often hired expats from the company's home country for China-based management roles. But now many companies are opting for local talent who speak the language, know the culture and understand the market. At the same time, the prosperity of Chinese companies is heating up competition for talent, forcing foreign companies to alter their recruitment strategies and work harder to match salaries.
"In the past, there was a lot of flow from one multinational to the next. Nowadays you see the interflow of executives from multinationals into the domestic companies," says Grace Cheng, country manager for executive-recruiting firm Russell Reynolds Associates Inc.'s Greater China division.
In the first quarter, China had the highest number of initial public offerings world-wide, with 110 deals accounting for 38% of total deals globally and 52% of global funds raised, according to Ernst & Young LLP.
Last year saw a spate of large Chinese IPOs from Agricultural Bank of China Ltd., E-Commerce China Dangdang Inc., and AIA Group Ltd. The trend continued with Renren Inc., Phoenix New Media Ltd. and others following suit this year.
As Chinese companies go global, their appetite for managers with international experience has grown, making employees at multinational companies prime targets, says Ms. Cheng.
A recent survey by executive search firm MRI China Group of over 2,200 employees in mainland China found that 64% had received at least one offer from another company in the past 18 months.
John Stroup, chief executive of cable manufacturer Belden Inc., based in Richmond, Ind., says his company has had a harder time lately recruiting and retaining Chinese employees. Chinese managers "are beginning to realize that multinational corporations are not their only option," he says.
Mr. Stroup's company has also had to pay more to compete with local businesses, he says. "It's not uncommon for people to have offers from other companies in your category with pretty sizable increases in pay," he says.
Belden has 1,900 employees in China, of which 80 are middle and upper management. In order to keep a steady pipeline of qualified managers, Belden changed its recruiting strategy: For the first time last year, it began taking on entry-level staffers it plans to groom into managers.
The company formed partnerships with about 30 Chinese universities, from which it recruited a pool of about 1,000 students that it narrowed down through a series of tests and interviews that measure language competency, technical skills and other functions, says Mr. Stroup. In June, Belden hired 10 of those candidates.
Information-services firm Wolters Kluwer NV says it doubled its Chinese head count to 200 employees over the past five years. The Netherlands-based company also added a regional C-suite of top corporate officers in China. However, "we do have people leaving Wolters Kluwer, and going to larger, Chinese companies," says China CEO Shasha Chang.
To make itself more attractive to Chinese managerial candidates, the company last year launched a rotational program allowing its Chinese employees to spend two weeks to a month working with Wolters Kluwer employees in one of its more than 45 locations world-wide. Ms. Chang says this helps attract Chinese talent, who are eager to gain international experience.
This year, the company also is spending 50% more on its talent-management program, says a company spokeswoman. She declined to provide dollar figures.
PricewaterhouseCoopers LLP has more than 10,000 employees in mainland China—having hired 1,000 since last June—working across its tax, audit and consulting businesses. China is one of PwC's fastest-growing markets, says its international chairman, Dennis Nally. But as "the state-owned enterprises start to compete much more on a global basis than they did in the past, they are becoming much more attractive for the Chinese," he says.
PwC recruits talent from within China, and also targets Chinese expats working in the U.S., U.K. and other parts of the world to work in China, says Mr. Nally. Over the past two years, the number of long-term assignees placed into China has grown by 10%, says the company.
Brent Saunders, CEO of U.S. eyecare manufacturer Bausch & Lomb Inc., says that more competitors entering the market in China are driving wages up. In response, Bausch & Lomb evaluates its pay practices in China quarterly, rather than once a year, which it does in most other countries, he says.
Four or five years ago Bausch & Lomb only had to compete against other multinational companies for talent; today it is state-owned and local companies as well that are making competition harder, says Mr. Saunders.
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