Help Wanted: Managers Go back »
2008-04-30 | All chapters
Help Wanted: Managers
Andrew Batson, Wall Street Journal, 29th April 2008
U.S. companies in China say recruiting talented managers for their local operations has become their biggest business challenge, a finding that highlights the continuing gap between the skills taught in China's universities and what businesses here are actually looking for.
A joint survey by three American chambers of commerce in China showed 'a continued worsening of human-resource challenges as companies expand,' said J. Norwell Coquillard, chairman of the American Chamber of Commerce in Shanghai. Difficulty in finding, training and retaining managers was named as the top operational problem by 37% of the 324 companies responding, more than issues such as regulation, bureaucracy or piracy.
U.S., European and other foreign business executives in China have grown increasingly worried about talent issues as they have expanded their local operations. 'The rapid growth of the domestic economy has created a fiercely competitive business environment that is driving rapid cost increases,' Mr. Coquillard said Monday. 'Demand for skilled, qualified staff still outstrips supply, and this key operating constraint shows no sign of easing in the near term.' He estimated that managers' salaries are rising at 8% to 10% a year.
Foreign and domestic companies in China are increasingly competing for the same relatively small pool of trained Chinese-speaking managers. While the government has greatly expanded university education in recent years -- schools turn out about four million graduates with bachelor's degrees each year -- quality remains an issue.
In their annual white paper, the American chambers of commerce said the Chinese educational system's heavy emphasis on rote memorization 'does not translate well' to the challenges employees face in jobs at foreign companies. They also said few Chinese universities have relationships with businesses or arrange for students to do internships. The European Union Chamber of Commerce in China also has urged the Chinese government to expand internships and vocational education to improve the skill sets of potential workers.
Wages for factory workers in China also have been on the rise, but that is less of an issue for most U.S. companies, relatively few of which manufacture low-margin products, such as shoes and textiles, for export. The export-processing businesses that congregate in the southern province of Guangdong, many of which are owned by investors from Hong Kong or Taiwan, have complained of rising labor costs. Some have sought less expensive locations in inland China or other countries such as Vietnam.
The chambers' survey shows that most U.S. companies are in China to sell to Chinese consumers and so are unlikely to follow that course. 'The majority of American companies are not in the reprocessing business and are the least affected by these changes. Our companies will continue to invest, expand and stay in China,' said Harley Seyedin, chairman of the American Chamber of Commerce in South China.
The survey also suggests that while companies are concerned about labor costs, they haven't yet become a major drag on profitability. While 55% of respondents said higher labor costs were hurting their margins in China, 65% of respondents nonetheless reported that their operating margins increased last year -- exceeding the 60% in 2006.