Recruiting in China

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.