Recruiting in China

Who's got the hottest job in China? The HR guy.

Michael Cline has seen the front line of the piracy battle in China. As a vice president for global personnel at AO Smith, the maker of heaters and motors based in Milwaukee, he helped guide the firm's China expansion from no plants in 2001 to multiple sites in four cities by 2005, and from zero employees to 3,000 people. Problems soon emerged: Employees were selling the company's technology to outsiders, and sales staff were, he says, "leading a dual life" by also working for rivals.

"The environment here was very different from anything the company had faced before," says Cline, who now runs a U.S. textile company in China. "I was spending 70% of my time" on China.

So AO Smith called in a U.K. consultancy called Control Risks to plug the security holes and help vet employees more carefully. They tried to root out nepotism by managers who directed business to companies controlled by family members, says Dane Chamorro, the China deputy manager with Control Risks in Shanghai. AO Smith declined to comment on the security issues. "There are a lot of messes here" in China, Chamorro says.

China's economic boom and attendant surge in intellectual property theft and financial crimes are taxing the skills of personnel departments. The demand for those skills is making personnel into one of the hottest careers in China today. According to consulting firm Mercer, wages in China for top HR executives of multinational companies grew 20% in each of the last two years to $97,000--in a country where per capita income is 1% of that figure.

The risk of a bad hire is getting bigger as manufacturers transfer sophisticated technology to woo local consumers and overseas investment funds pour fresh capital into local businesses. Corporate-snooping outfits are thriving as clients demand more background checks on their partners and employees. After opening a Shanghai office in 2003, Control Risks has gone from 2 to 22 employees in the city and will add an office of 5 people in Hong Kong this year.

For decades after the Communists took over in 1949, workers spent their entire careers with one state-owned company and rarely moved to a different town. Although state-owned enterprises now account for only a third of the economy and workers are far more mobile, there are no good national databases for checking employment histories, education credentials and criminal records.

The cost to check out a potential or past hire can range from $100 to $5,000, more than in the U.S., where criminal, legal and credit databases are more easily checked. The expense and hassle deters some businesses from even bothering, says Control Risks' Chamorro. Résumé fraud is rampant, and applicants frequently forge names on recommendation letters. "They don't expect to be checked--that's why they do it," says Chamorro.

And don't bother calling a former employer by phone. "If you call another part of China to ask about someone, people will tend to say everything is fine because they don't want to risk trouble from saying anything bad," says Simon Yin, cofounder of Hongren Club, an association based in Shanghai of about 1,000 personnel professionals. Yin is a big proponent of informal information exchanges about job applicants and of using references among group members.

"A lot of laws are there, but they don't always help. You have to work internally," says Arthur Yeung, who teaches at the China-Europe Business International School.

http://www.forbes.com/business/global/2006/0417/022.html