Understanding the differences; Acting on the commonalities…

The common practice, when looking at the prospects of selecting the right individual for an overseas assignment, is usually to focus on the individual’s technical/functional skills, with the assumption that it will be sufficient to operate successfully across borders. I recently collaborated with Brian Sun, Managing Partner from Orion China, on a presentation to visiting US EMBA students, from Purdue University (Chicago), aimed at highlighting the characteristics of leaders who can seamlessly navigate across borders. It was interesting to compare the challenges a manager is facing at “home” and overseas.

There is no place like home... On the path to delivering results, a local manager is faced with a set of challenges usually expressed in 2 dimensions. The internal environment, on one hand, requires an individual to decode, adapt and manage communications and interactions patterns with peer employees and business partners, as well as adjust to the headquarters “way of doing things”. On the other hand, the external environment poses the challenges of day-to-day management of the competitive environment, the clients/customers element, as well as complying with the local regulatory environment.

In the local context, assuming we are referring to western economies, such as Western Europe or the US, with consistent and clearly-defined regulatory systems in place and the added value of operating in a “native” environment, where cultural and language barriers do not exist, the challenges are minimal and coping with it is down to an individual’s ability to fit or find his/her place within the system. A “system” within which one has grown up and been educated, where communication patterns and general value basis are shared or, at least, understood.

Apart from the language aspect, a candidate bound to a US expatriation from France or a UK manager on his/her way to Italy for 3 years, will face little challenges adapting to an environment articulated around similar values and common cultural anchors: the commonality of the alphabet or social “landmarks” like a Tesco, Carrefour or Wall-mart, around the corner, for example... In this perspective, the transposition of an individual’s performance and efficiency from a posting location to another can be a smooth and rapid process, yet, with a little effort from the candidate.

Reality check … Things start to get complicated when an individual is assigned to operate within a completely foreign environment. Foreign in all aspects from value system, culture, to language and where one finds him/herself immerse in what can be referred to as an alien setting. The process of adaptation to life and work in a foreign culture, like China, can be difficult. It can roughly be divided into four phases, of very variable lengths: honey moon, cultural shock, reconciliation, adaptation.

During the honey moon phase, everything appears fascinating and new, the individual feels somewhat similar to a tourist. He/she discovers, with curiosity and excitement, a new country and the new lifestyle that can led.

After a short while, however, the more an individual immerses him/herself in day-to-day life, the more differences become apparent: differences with one’s own references, the person’s way of thinking and doing things, in contrast with the ways of the local people. Everyone reacts differently to this situation: anxiety, doubt, frustration … An individual can be tempted by isolation or be prone to adopting a defensive or rejective attitude toward the host country and its inhabitants. This is the phase of “cultural Shock”; a difficult, however important, experience, part of the adaptation process to life and work in a foreign setting.

For most expatriates, the cultural shock comes to an end with the individual’s familiarization to the language and culture: this is the reconciliation phase.

Day by day, the adaptation process goes on. The individual becomes more confident, more sensitive to positive aspects of the new environment. Events and people’s reactions are no longer a surprise, the expatriate has re-established his/her marks, and has gained enough awareness to navigate local codes of conducts and lead a more comfortable life.

The rapidity of the adaptation and integration process in the host country is not bound to any fixed rule. The country, the personality of the individual, the availability of expat communities, his/her marital situation, prior expatriation experiences, …are all elements influencing this, where one’s expatriation experience can be different from another one and where each phases of the adaptation process can sustain its own agenda.

You have just crossed over into the Third Dimension… While operating in a country like China, a third dimensions needs to be taken into consideration, in terms of the challenges facing a manager. The issues an individual faced in his/her home country, are accentuated by cultural differences, language barriers, differing value systems and, in some cases, obscure regulatory systems. Reactivity of the headquarters is impacted by distance, business ethic takes an entirely different shape, communicating with peers redefines the meaning of lost in translation, and simply trying to settle down, living a comfortable day-to-day life can, as aforementioned, be a frustrating experience. The risks of not managing properly these 3 dimensions are obvious for both the employer and the individual. Selecting the right candidate for expatriation should therefore be done through the careful examination of 3 essential elements.

The essential mix…There is no magic formula to a successful cross border assignment, still, professional qualities, that is, the technical and functional as well as managerial expertise, are key. If an individual does not have this foundation, there is no added value for an employer to “risk” or even justify an expatriation. Having some sort of international experience through language study, travel, and such also helps in forming the necessary aptitudes for an overseas assignment. A second important ingredient is somewhat linked to an individual’s “Global” qualities.

The knowledge and understanding that many routes lead to the same destination, but most importantly, that in different places, people do things in a different way, is an essential part of what can be defined as a multicultural mindset. There is no universal way to do things: trying to introduce a new or foreign perspective when looking at problems is good, attempting to impose a foreign way can lead to poor and even dramatic consequences in some places. Empathy, a strong commitment toward learning, the ability to reassess and realign constantly one’s ways in order to make the most out of the systems and culture in place, are among the few additional signs of sound “Global” qualities.

Lastly, country-specific cultural qualities are also an important element to take into consideration when considering expatriation. Some can be developed on-site, others have to be deeply embedded in an individual’s personality. In China, humility, patience, reactivity, an open-mind, flexibility and guanxi-building talents are among the essential traits an individual must have in order to smoothly settle down, professionally as well as personally.

Times have changed since the opening of China 30 years ago… The era of the “missionary” expat manager is long gone, with a local managerial workforce now having solid and up-to-date technical skills (I am not going, willingly into the Leadership in China debate, in this article). An employer aiming at filling a managerial / leadership role in China needs to look at a much broader picture while considering the necessary requirements for the appointment, of a foreign professional, in order to properly assess the real added value of the foreign appointee, on the long run, as well as minimize the impact on productivity generated by the appointee’s potential cultural shock and length of the adaptation process. Behavioral interviews, peer feedback, or personality assessment, could all be a good start…

No free lunch in China…

I tend to receive a recurring misconception about the Chinese labor market from overseas-based clients. This misunderstanding primarily affects overseas-designed provisional staffing budgets as well as the perceived value of quality of China-based recruitment agencies. In short, agencies are perceived to attempt inflating candidate packages for higher fees. While some rogue agencies do, there is a distinctive trend that the cost of Chinese talent is catching up with international benchmarks.

China is an emerging Dragon, Shanghai, a crouching tiger… China is an emerging and developing economy. At least, it is its official status according to the International Monetary Fund's World Economic Outlook Report, dated April 2008 (1). Taking into consideration the measurement criteria, based on statistical indexes of element like income per capita, GDP, literacy rate and such, are calculated against the sheer size of its population, it can only make sense.

Shanghai is, along with Beijing, Guangzhou and Shenzhen the economy’s locomotive. Having the status of “wealthiest” city in China, with a GDP per capita, above US $7,000 for 2007, it is however still far behind any Major European capital (2). To give you a clearer idea, Shanghai’s GDP per capita is below a city like Istanbul, Turkey (3). Once again, keep in mind the size of Shanghai’s population (over 15 million souls) and you can understand that GDP per capita does not necessary reflect the reality of local white collars, which are far from being the majority.

Another interesting piece of information is the Mercer's 2008 Worldwide Cost of Living survey (4), which gives us an idea on the rising costs of living in Beijing and Shanghai, with both cities present in the Top 25. The results, however not entirely applicable to local nationals, as based on expatriate populations, still gives us an insight on a certain reality of the local economy. That is, the gap in cost of living observed between a modern city like Shanghai and other “emerging” one, in China.

Despite all these, Shanghai can still be considered as a “cheap” city, with low business operations related costs, minimal salaries requirements, and reasonable living costs below those of similar sized cities in US or Europe.

The “Made in China” picture of low wages is still relevant today. Compared to wages in the EU or US, employing local nationals is indeed an affordable option. Looking at the table 1 comparison of the median US, UK and Chinese total packages (salary + bonus and benefits) on some common positions, the point is made. At first glance, it quickly illustrates the cost-effectiveness of employing local nationals, considering we are talking about the “median” or average population, of course.  It quickly demonstrates that employing the “average” local candidate can still be regarded as a cost-effective solution.

If you pay peanuts, you get monkeys… No offence to anyone in particular, as this applies to pretty much anywhere around the world… But, If you take a closer look at this “average” labor market, as it is the one providing input for most official statistics, surveys and other reports that one can easily find online and, incidentally, the segment on which a lot of people base a provisional recruitment budget upon, you get a rather interesting picture... Simply put, by a fellow recruitment specialist, “the average employee in China does not speak English, he does not work in a foreign firm, he does not think outside the box, understand western reporting structures, go to a top university, or have a chance of getting hired into your firm…”(5).

The average candidate has also the shortest retention potential, following a simple logic of job hopping for ever shinier titles and bigger financial packages, thus leaving a city like shanghai with a dramatic employee turnover at around 18 months and a managerial workforce with somewhat arguable overall managerial skills.

If you are the decision maker of one of these multinationals, which are slowly initiating a shift toward management localization by cutting off expatriates’ budget plans, would you really consider handing over the keys to your financial, commercial or product development operations to an average candidate whom, however nice of a person, would most likely fail to properly relate to, understand or even communicate on basic day to day issues?

No money, no honey… On the other hand, you have the candidates which are at the center of what is now known as the “Talent War” (6). These are candidates with bilingual English abilities, 5 to 10 years of solid people and projects management experience, strong overseas exposure, the ability to think in a systemic way, whom are fully acquainted with western reporting systems, can deal with foreign clients with the highest level of service quality, have graduated from top Western universities and can leverage on the added-value of their biculturalism. These are the candidates companies are fighting over for in Shanghai, Beijing or other tier 1 cities, with packages narrowing closer to those in the US or Europe, and sometimes going well beyond.

 

Figure 2 sheds some light on a more relevant picture of the Shanghai employment market (for top candidates), with key functions such as Finance, HR or Sales clearly aligning themselves on EU/US levels. This “headhunter’s” dream can quickly turn into an employer’s nightmare, if the latter does not properly understand the realities applying to the local market: An overall talented, self-motivated, creative, and experienced manager is a scarce resource in China, and a 28 years old sales manager making above RMB 1 million (EUR 100,000) is common. 

Assignments, completed by Orion China, regularly cover positions for Financial Controllers around the RMB 500,000 (EUR 58,000) figure, HRDs in the vicinity of RMB 700,000 (EUR 80,000) and many others, with financial packages often giving a new meaning to the common image of China as the land of cheap labor. You need to face the facts, if you want to buy yourself the next superstar everyone else wants, you will most likely have to fork out a substantial amount for it, at least, more than your competitors.

Money can’t buy happiness…but you can definitely get yourself a top senior HR or Finance candidate, in China, for the right price… Sure, there are no comparisons possible between a Shanghai or Guangdong based factory worker and his counterpart in Europe, the US or Japan. China has and will continue to retain its image of “world’s factory” for years to come, with affordable labor costs and ever increasing quality standards. Nonetheless, good management, talented leaders and high potential profiles come with a high price tag, just like it would, in “Developed” economies.

Companies that will successfully implement localization strategies, in the upcoming years, and leverage on the amazing opportunities this rapidly growing market yields; are the ones currently understanding that quality, experience and skills come at a certain price, in particular in the Chinese economic capital Shanghai is. A solid and ethical executive search firm, with deep networks, up-to-date market knowledge, and experienced consultants, is therefore a partner of choice to prevent your next hiring from becoming a time bomb, in your company’s development plan, or a pricey mishap that may not look great during your next board meeting.