China Checklist

Jan. 27, 2005
Managers must rethink HR practices to keep skilled workers: free lunches and Popsicles may help.

Moving operations to China takes more than a good logistics plan -- you also have to accommodate the Chinese workforce. Retention of employees is crucial in any country, but, unlike the U.S., a shortage of educated and qualified workers in China has turnover rates soaring.

According to Mercer Human Resource Consulting LLC, New York, of the 718 million people that comprise the Chinese labor force, only 27% are considered skilled, white-collar workers, and just 16% are employed in production jobs.

Additionally, employees have little loyalty to the company they work for unless the company has their interests in mind.

To be sure, the 2004 edition of Mercer's "Managing China's HR Environment" states that "the majority of [Chinese] workers require or expect companies to provide training programs," "everyday work should relate to their career plans" and "individual career is more important than the company."

To keep good workers, a strong human resources team is a must. Just be aware: Human resources practices that fly in the U.S. don't always translate well in China. In fact, what is the norm in the U.S. can be a big no-no in China -- literally.

For instance, according to Ming-Jer Chen, professor of business administration at the Darden Graduate School of Business Administration at the University of Virginia, saying "no" to a Chinese worker can have undesirable consequences.

"The Chinese do not know the notion of yes and no," says Chen. "They do not grasp the ambiguity of what yes and no can mean. Chinese do not want to hear 'no' because they do not want to lose face."

Chen explains that if an employee makes a certain request in front of a lot of people, and the respondent says "no," he gives the impression that he rejects the employee as a person and as a colleague.

"You need to provide a ladder so that he or she can step down," says Chen. "If someone asks for a day off, you could say, 'I don't think tomorrow would be a good time because we are on a deadline. How about next Friday instead?'"

Basically, soften your language and provide an excuse, says Chen, who has been in the U.S. for 23 years and admits that it took him 12 years to figure out how to say no.

Emphasize The Personal

Understand also that the view of a Chinese company is very different than a U.S company in terms of the role it plays in the lives of its workers.

While there are many Chinese companies that aren't as scrupulous in terms of human rights and resources, there are just as many companies that adhere to the edict of treating workers fairly.

Additionally, "Chinese President Hu Jinato has said the nation's revitalization strategy based on human resources and development should be taken as a major and pressing task of the State and the Communist Party of China," according to Xinhua News Agency, the state news agency in China. "Hu said China will give priority to raising educational, vocational and creative standards, and improving the ethic, scientific and cultural levels and health of the people."

According to Chen, a Chinese company is not just a commercial organization, it's also a social entity.

"Because of the social component, the culture comes into play in such a big way. The notion of a family and the expectation that the owner of the company or the president or the top leader is more like a family member means that workers want [their leaders] to take into account their social welfare in addition to their business welfare."

Indeed, "Personal relationships between managers and employees is important," according to Mercer. "In China, there is a higher sense of loyalty to the manager than to the company. It is important that people with high levels of responsibility show interest in their employees. If an employee loses trust or interest in their superior, they may decide to leave the company."

Adds Chen, somewhat jokingly, if management can win the trust and confidence of the Chinese workers, "they will work overtime for you and you don't need to pay them."

Be Sensitive To Image

Even giants such as Wal-Mart have to respect the Chinese way of business and culture in order to become economically prosperous.

In China, unions are the rule. However, the role of Chinese unions is much different than U.S. unions. According to Chen, in China the union tends to go along with management -- they are much more closely in line. But a union is still a union.

"For the first time Wal-Mart is going to have a union -- in China," says Chen. "In different parts of the world and even in this country, Wal-Mart is under so much pressure to unionize, but it just never succeeds. As powerful as Wal-Mart [is] they have to make an adaptation in China."

Another big company that learned the hard way that China demands respect of its culture is Nike.

A recent commercial that aired in China featured Cleveland Cavaliers' LeBron James battling and beating a kung-fu master, two women in traditional Chinese garb and a pair of dragons. The animated commercial was banned soon after its debut because it sparked anger and offended national feelings.

Nike responded with this comment: "Nike regrets the 'Chamber of Fear' television advertisement which has caused concern among some consumers," the manufacturer said in a statement. "Nike did not intend . . . to offend the people of China or show disrespect to the Chinese culture."

This well-advertised gaff is proof great care needs to be taken when dealing with the Chinese. But social faux pas aren't limited to public events.

Darden's Chen relates a story that happened to an American expatriate who was working as a human resources executive in China.

"She was holding a meeting with all the top managers, and a Chinese manager was late," Chen says. "She showed that she was upset [that the person was late], and she was sabotaged for the next three years. So the question becomes, how can you make a very culturally sensitive inquiry [to why the person was late]?

"When I spoke with her, I told her you can ask the same question, but in a very different way. When your Chinese colleague arrives ask is everything fine at home. You are asking why you are late, but you are couching it in concern in a cultural context."

The same treatment goes for production workers.

According to Chen, in China workers don't want to be singled out in front of their peers. Again, saving face is very critical in China's cultural context.

"When you provide performance feedback, you can say 'You know I noticed that your productivity has been declining, and I am just wondering if there is any way I can be of help.' It will make the effect completely different."

For any company working in a global environment, paying attention and showing respect and appreciation to the local culture is always a good thing. To do so may require bringing in local people to manage to manage workers.

"I think the recent trend is that most of the companies start completely localized with human resource management, where the head of HR tend to be local Chinese," says Chen. "They are aware of the local Chinese culture and practices."

Rewarding Appropriately

Rewarding employees for exemplary work needn't be a monetary issue. In fact, some Chinese would feel this is a bribe. The best way to show appreciation is to present the employee with an award in front of family and friends.

"When you want to reward your employees, very often the best reward will not be given to the individuals, but presented to the parents," notes Chen. "The message is very clear: You should be proud of your son or daughter, and I want to honor you. That will carry so much weight for the Chinese employee because you make the Chinese employee look so strong in front of his social contacts."

Another way to show Chinese employees you have their interests in mind, offer them Popsicles.

While this practice may sound strange, a Whirlpool clothes washer factory in China, located in Pudong, an area of Shanghai on the opposite side of the Huangpu River, has written in its union contract Popsicle breaks when the temperature exceeds 100 degrees Fahrenheit, a not infrequent occurrence in the summer months.

Like workers in the U.S., Chinese also hold health care, childcare and elder care as important bargaining chips when searching for a job.

"It's not an over-exaggeration for a typical Chinese company to have 45% of costs in benefits -- health care or housing related," says Chen.

According to Mercer, employer-based housing subsidy plans have the employer and employee contributing 7% of the previous year's monthly salary, with a maximum contribution of CNY 311 (US$37.58). Companies also help employees solve housing issues via paying housing loan interest, providing housing allowances and setting up house savings plans.

Additionally, manufacturing plants provide free lunches to employees.

"So that explains why a Chinese company truly is a combination of social and economic entity," says Chen. "How you look after [them] in terms of housing, whether you provide tuition or if [employees'] parents are living with them, if you provide health care in a family package -- [Chinese] workers have different expectations."

Compensation Costs In ChinaAnnual base salary in US dollars

Head Of HR

Head Of Production

Production Supervisor

Production Worker











Hong Kong





SOURCE: 2004 Mercer Human Resources Consulting LLC

Chinese New Year And More

Public holidays 2005 2006
New Year's Day Jan. 1 Jan. 1
Chinese New Year Feb. 9-11 Jan. 29-31
Labor Day May 1-3 May 1-3
Communist Party Anniv. July 1 July 1
National Day Oct. 1-3 Oct. 1-3
Special Holidays
International Women's Day March 8 March 8
Youth Day May 4 May 4
Children's Day June 1 June 1
Army Day Aug. 1 Aug. 1
SOURCE: 2004 Mercer Human Resources Consulting LLC

HR Challenges In China

  • Building leadership capabilities
  • Acquiring key talent
  • Retaining key talent
  • Raising workforce productivity
  • Measuring contribution of human capital
  • Succession planning
  • Increasing return on direct compensation
  • Managing talent globally
  • Managing human capital during M&A
  • Coping with aging workforce

SOURCE: 2004 Mercer Human Resources Consulting LLC

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