Recruiting in China

By Benjamin Robertson

Chinese graduates are facing their first employment crunch in 30 years, but employers aren’t rejoicing. Despite the apparent abundance of labor, there is a paradox: Companies often have trouble finding the right candidate for the job.

Another job fair, another riot.

Such is the demand for college graduate jobs in China these days. Pictures from a recruitment fair in the central Chinese city of Zhengzhou showed smashed doors, broken glass and an escalator with sides bent outward at an extraordinary angle. Thirty-thousand eager students surged into the exhibition center in mid-November, overwhelming police, security guards and one hapless escalator as they rushed to be the first to sign up with potential employers.

It was an image that revealed the desperation of Chinese college graduates facing an employment crunch for the first time since market reforms began in the late 1970s. As more people enter universities than ever before, government figures indicate that 20 percent to 50 percent of this year’s 4.13 million graduates will not find jobs. It’s a situation that shows little sign of abating in the years ahead. A December report from the government-affiliated Chinese Academy of Social Sciences says that next year there will be 25 million urban job seekers chasing 10 million jobs.

"It is now very difficult to find work. There is a strong supply and demand imbalance in the college graduate market," says Liu Hao, CEO of Zhaopin, one of China’s leading recruitment portals. Its services include online recruiting, newspaper recruiting, headhunting and campus recruiting. "Whereas the U.S. job market is cyclical, China has not seen a recession in 20 years."

A generation of college graduates has never seen large-scale layoffs, says Liu, echoing the concerns of senior government leaders, who have worried about potential effects on social stability and have held crisis meetings regarding the issue.

Zhaopin’s Web site is registering an average of 70,000 new job seekers every week. Yet despite the apparent abundance of labor, there is a paradox: Liu says companies often have trouble finding the right candidate for the job. Though China is famed for a large, mobile, hardworking workforce, the 37-year-old CEO suggests the country’s education system is not always producing the right sort of talent.

Many multinationals would agree with him. Despite the record number of graduates, sourcing talent is now the leading concern for American companies in China ahead of intellectual property rights protection, according to an annual members’ survey of the American Chamber of Commerce.

"Employers are looking for someone with practical work experience, leadership ability and creative problem-solving skills," explains Jim Leininger, general manager of Watson Wyatt in Beijing. "The education system is very good at developing quantitative ability but falls short in developing some of the key skills employers are looking for: creative thinking, group problem solving and the ability to apply knowledge to real-life situations."

At the Beijing offices of Microsoft, human resources director Danielle Monaghan concurs. Microsoft often advertises through Zhaopin and has no shortage of applicants. The company often receives 16,000 to 17,000 applications for just 300 places. Monaghan says the company still needs to invest time and money into certain forms of training that would be unnecessary back in the U.S.

"We do have to develop their skills to work in a multinational," she says. "Generally graduates are without strong team-working skills. They don’t take a lot of initiative. They don’t push back or say no, and we have to teach these skills because that is key to survival at Microsoft."

While China is by no means the only country facing a talent shortage, its blistering growth over the past decade makes any shortfall all the more acute. In a 2005 report titled "China’s Looming Talent Shortage," consulting firm McKinsey & Co. predicted the country’s economy would have difficulty moving up the value-added ladder from manufacturing to services if the quality of graduates were not addressed.

Like recruitment portals in the West, Zhaopin provides an online interface for posting job advertisements and résumés. It allows Liu to see exactly where the shortfalls are. High-tech industries like auto and drug manufacturing are especially short of quality candidates, he says.

A step above graduate-level job seekers, midlevel managers in the marketing and finance sectors are also in high demand, Liu says. Zhaopin’s goal is help employers fill these gaps in their hiring process. Using part of a recent capital investment from Australian firm Seek, Zhaopin hopes to upgrade its search algorithms to provide better matches and value for employers and would-be employees alike.

"In the past you [would] put out an ad and get a hundred résumés and you would be happy. But now we realize that only a small percentage would be qualified," Liu says.

Another solution to the lack of graduate talent is company training. But while larger multinationals have well-established training programs, smaller foreign companies and their Chinese counterparts are just beginning to invest in the sort of team bonding and leadership exercises that are common practice in the West. In a survey of 558 multinationals in Mainland China, Watson Wyatt found that the average annual cost of training per employee is only $200.

Though puny, the investment reflects a change in corporate thinking, Liu says.

"The standard HR managers in this market were guys who pay salaries and hire and fire people. Now, more and more companies claim they realize human capital is the most important form of capital," he says.

Spotting an opportunity for expansion, Zhaopin has begun company training programs. Clients so far include a municipal government tax bureau and various state power companies.

But a limited length of job tenure can offset such investment. Because talent is in short supply, employee poaching is rife within industries.

"In the U.S., the average length of time someone stays in a job is five to six years. In this market it is two years," Liu says. Figures from Watson Wyatt say annual employee turnover at multinationals is 14.3 percent, and because employers are desperate to find and retain talent, annual salary increases now average 7.8 percent, noticeably higher than the 1 percent to 2 percent rate of inflation.

Despite their exposure to the dynamics of the human resource market, Zhaopin has not been immune from high turnover. At one point, its sales team was posting 25 percent annual turnover, a frighteningly high proportion that Liu says has since been brought under control.

The key is breaking up office hierarchies by allowing new sales members to chase existing but inactive accounts. Previously, client accounts were the domain of the original contract winner, regardless of whether any recent sales had been made.

One emerging trend among multinational companies is to relocate inland, away from the wealthier and more expensive eastern seaboard. Provincial capitals such as Chengdu, Chongqing, and Nanjing are already booming centers of industry and commerce and should in theory offer large pools of untapped talent.

Liu, whose company also is expanding to cover the country’s provincial capitals, is less sanguine. He says the top talent has migrated to the big cities of Beijing, Shanghai and Guangzhou.