Recruiting in China

Chinese enterprises that found themselves falling behind the talent rush in the past should take heart from the global economic slowdown as it presents a golden opportunity for them to recruit qualified and experienced executives and professionals from around the world.

Of course, talent doesn't come cheap, human resources experts say. But it is at least available as more and more US and European multinational companies are going into the retrenchment mode to cut costs.

Human resources experts are of the view that the layoff strategies are"short-sighted" and costly in the longer term. When the economy begins to turn the corner and embark on a new cycle, these corporations will have to offer unusually high salaries and attractive incentives to compete for the talented personnel they laid off.

But before the economic pendulum swings to the other side, there exists a window of opportunity for Chinese enterprises, long constrained by their relatively more rigid pay scales and rudimentary incentive programs, to get the professionals they need to expand their businesses on the mainland and overseas .

In an exclusive interview with China Business Weekly, Goodwin, CEO of Antal International, a global recruitment company that charges corporate clients thousands of dollars as consultancy fees, says "hiring people now can bring greater long-term benefit than firing".

Goodwin advocates different strategies for local companies, multinational firms already present and for those companies who want to enter China. He stresses that the ultimate objective for all three categories would be "a long-term HR policy".

US companies tend to react a little more aggressively to the perceived effects of the global economic downturn and reduce their workforce quickly. On the other hand domestic enterprises and European multinationals have shown greater restraint in their response to the crisis, says Goodwin.

In these uncertain times when the developed economies, especially the US, are sliding into a recession, corporate executives need to be careful while formulating the human resources strategies, he says.

"Companies that are now firing people would experience problems next year when the economy improves," Goodwin says.

"These companies will have no choice but to start rehiring then at higher costs," he predicted. During the 1998 economic downturn, a US company swiftly laid off 3,500 people to cut costs, he recalls. When the economy began to recover a few years later, it took that same company 18 months to re-hire the people it needed and at much higher costs than before.

Because of the difference in corporate cultures, European and Chinese companies tend to follow a much more conservative approach in cost control than their US counterparts. They do not offer big-time salaries to compete for talents, but at the same time they also do not resort to massive layoffs when they encounter bumps, says Goodwin.

His advice to foreign companies in China is to save costs by speeding up the process of localization. Companies should hire more Chinese managers and professionals rather than bring people from their own countries. The quality of the Chinese management talent, especially those who have worked in foreign companies has improved rapidly in the past three years, he adds.

With the knowledge and cultural gap narrowing, localization is only a simple matter of economics, he says. "Foreign experts may cost the company 300 to 400 dollars every month apart from costs related to accommodation, car, driver and children's education. In contrast, hiring Chinese staff will not cost companies the extra expenditure, says Goodwin.

CapitaLand, the Singapore-based investment and real-estate firm is one of the companies that has followed the localization route. "In 2009, we will be hiring even more local talent," says Liew Mun Leong, CEO of CapitaLand. The company's target is to eventually have a 100 percent Chinese management team.

"It is very difficult for a foreigner to understand Chinese culture.

So the best way is to hire executives locally," says Liew.

Opportunity beckons

Goodwin says the small- to medium-sized Chinese firms should now take the opportunity to grab whatever talents they can get. Antal has over 600 clients in China and of these 35 percent are local companies.

Chinese companies that acquire foreign companies could also encounter talent challenges like when Lenovo took over the PC business of IBM.

But Goodwin says, such problems can be solved more easily. "In the next six months, when Chinese companies enter overseas markets, they will see a veritable talent pool of directors, managers and even CEOs from western companies to choose from due to the recession. The Chinese firms can hire them for overseas development as they have better chances to take over struggling US companies," he says.

"If the financial crisis had not happened, the smaller companies would never have been able to compete with big corporations for top managers," Goodwin says. "Now is the best time for them to tap the market for talent."

The moot question, however, is how to retain the hired talent when the economy starts growing again. Goodwin feels this is not a major deterrent as the small companies can also grow. "Small firms would become mid-sized and they in turn will become big.

The talent hired by small and mid-sized companies would also scale up the ladder in tandem with the firms and hence remain loyal to their employers.

"As long as the talent feels satisfied with their job and get paid well there is no reason for them to leave for bigger companies," says Goodwin.

He adds that it would be prudent for companies that are planning to enter the Chinese market to hire talent locally.

"With US companies laying off people, it would be the right time for other foreign firms to hire people from the Chinese talent market," says Goodwin. He cites the example of myweather.com, a meteorologic solution company that is planning to hire local talent for its business expansion.

The All-China Federation of Trade Unions said yesterday it will help ensure migrant workers receive their salaries on time, as Spring Festival - traditionally, the peak season for delayed payments - is fast approaching.

Federation chairman Wang Zhaoguo said unemployment among migrant workers has become one of the biggest problems caused by the global recession.

"Because migrant workers still receive their salaries late sometimes, we should work harder to tackle this problem," he said.

The federation's vice-chairman Sun Chunlan said the global recession might drive more migrant workers to return home next year, so the federation should do more to protect their interests and help them become reemployed.

The federation has 210 million members, 65 million of whom are migrant workers. China is home to 230 million migrant workers, federation figures showed.

In October, five rural migrant workers hurled bricks onto the streets from atop a 32-story building in Zhengzhou, Henan province, in hopes of arousing public attention to help them win wage arrears. They were charged with disrupting social order and were brought before a local court on Dec 2. The court has yet to issue a ruling, Dahe Daily's website reported.

"We should bring more migrant workers into trade unions, ensure they receive their pay every month and offer guidance to help them start businesses or become reemployed," Sun said.

Tong Zhihui, a professor at the school of agricultural economics and rural development at Renmin University of China, said a high percentage of migrant workers have joined trade unions. The tricky part is helping unions reach their potential, Tong said.

"Most migrant workers tend to find lawyers or directly appeal to the law when employers violate their rights. It would save time and money if trade unions could fulfill this role," he said.

Sun said more trade unions should be founded in towns and villages, so migrant workers could also find support after returning home.

Xie Guiji, a migrant worker who recently returned to his hometown in Sichuan province, said he had not yet joined a union.

"I am just doing odd jobs now. I get my pay every day after work but still do not know where to go if someone refuses to pay me on time," Xie said.

"Before, I did not know we had trade unions in our county. Now that I know they can protect me, I will apply to one after the New Year."

Human Resources and Social Security Minister Yin Weimin said in Beijing on Monday that China aims to create 9 million new jobs in urban districts next year.

Yin said China wants to keep the registered urban unemployment rate under 4.6 percent next year.

"The economic slowdown due to the financial crisis will add difficulties for Chinese seeking employment. The job situation in China is grim, so effective measures must be taken to help new graduates, migrant workers or other groups, he said.

The urban unemployment rate in the past five years was below 4.3 percent, but this year's target was set at 4.5 percent because of the severe employment situation.

The government was trying to reduce the burdens of employers by such methods as deferring payment of social security funds.

Unemployed migrant workers who return home are being encouraged to start businesses. They will get credit extensions, tax breaks, business registration and information consulting service, according to the country's central rural work conference, which concluded on Sunday.

Ministry of Agriculture figures from 10 provinces and municipalities show that about 7.8 million migrant laborers had returned home earlier than in previous years for the Spring Festival.

Most multinationals, including those on the Fortune 500 list, have set up labor unions on the Chinese mainland, a senior unionist said Wednesday.

According to Guo Wencai, organization department director of the All-China Federation of Trade Unions, 313 labor unions have been set up by 83 percent of headquarters of multinationals in China.

About 3,843 of their corporate entities across the Chinese mainland, or 85 percent, have established trade unions so far with nearly 2.13 million union members, he said.

In provinces like Hebei, Hubei and Liaoning, more than 95 percent of multinational entities have been unionized.

Guo said China has made important progress in persuading the unionization of multinationals in this country but there are still some multinationals' headquarters and entities which fail to set up labor unions, including US Microsoft, Wyeth Pharmaceutical, Morgan Stanley and Japanese Marubeni Cooperation.

China has the highest number of trade union members in the world, with membership increasing from 123 million in 2003 to 209 million by June this year.

The Ministry of Commerce on Tuesday urged workers headed for jobs overseas to select employers with care amid the global financial and economic crisis.

The crisis has affected some foreign employers' ability to pay, and overseas workers often become the victims, said an official.

Workers should carefully verify prospective employers' information, said the official.

Recently, about 200 construction workers who went to Romania for jobs told the Chinese embassy about problems including defaults on wages.

China's outbound labor generated revenue of $7.24 billion from January to November, up 24.2 percent. At the end of November, there were 794,000 Chinese workers working abroad, up 51,000 over a year earlier.

A sense of uncertainty is growing among jobseekers as the country faces a worsening employment situation, experts said on Friday.

"There is a strong sense of insecurity among migrant workers, college graduates and even white-collar workers amid the global financial crisis," Guo Weiqing, a professor of public administration at Guangzhou's Sun Yat-sen University, told China Daily.

Tens of thousands of migrant workers have lost their jobs in Guangdong province with the closure of factories hit by the crisis.

"It's like an epidemic and everyone is now worried about their jobs," Guo said.

According to the latest survey from the Ministry of Human Resources and Social Security this week, 4.85 million jobless migrant workers had returned to their hometowns by the end of November, and nationwide, more than 10 million of migrants are currently out of work.

Around 670,000 small firms have closed this year as a result of the global financial crisis, adding to employment pressures, State Council advisor Chen Quansheng told a forum in Beijing on Friday.

About 6.7 million jobs vanished, many in the export hub of Guangdong, pushing unemployment well above the official figure of 8.3 million, Chen said.

"The real figure is much higher than the official statistics, which only report urban registered jobless," he said.

"The major problem in China now is employment, especially for university graduates and young migrant workers," Chen said.

An increasing number of graduates will face a more difficult situation next year. The unemployment rate for new graduates is over 12 percent and 1.5 million of them will be without a job by the end of this year, while 6.1 million more will enter the job market next year, a Chinese Academy of Social Sciences report said.

"Facing such a tough time, young migrant workers and students can easily get emotional or hotheaded and may become a potential threat to social stability," Guo warned.

Li Wei, a CASS researcher on social development, suggested that more social security measures should be introduced to ensure the basic living standards of the jobless.

He also said the NGOs can play a more active role in social relief and vocational training programs.