As Asian multinationals expand abroad, they are developing employee recruitment and retention strategies in overseas markets to bolster growth. What can Western companies learn from these efforts?
Chinese investment abroad is booming. In 2012, Chinese companies invested nearly $80 billion overseas. But as these companies move into overseas markets – like the more established Asian multinationals before them – they are running up against cultural barriers with staff in their overseas offices.
“There have been many, many retrenchments and losses by Asian companies as they have stumbled over local cultural norms and language difficulties while clinging to rigid and often hierarchical practices that worked well for them at home,” according to a recent report by management consulting firm Accenture. The report examines a new generation of Asian multinationals that are investing in recruiting and developing talent outside their home markets to fuel innovation and growth.
According to the report, companies like Japan’s Takeda Pharmaceutical Co. and South Korea’s Samsung Electronics Co. Ltd. have embraced “borderless” teams and innovative talent management programs that they see as essential to success in overseas markets.
A few Chinese companies have taken note, but many still struggle to adapt to human resources practices that translate to overseas markets, says Claire Yang, an author of the report, managing director, and the lead for the Accenture Talent & Organization group in greater China.
Yang answered some of our questions over email about the human resources challenges Chinese companies are facing as they expand abroad, what successful Asian multinationals have done to attract and retain talent, and what Western multinationals can learn from their Asian rivals.
The report you co-authored talks about how Asian multinationals are expanding globally by embracing diversity and creating “borderless” teams. Can you tell us more about this trend? Do you see many Chinese multinationals taking this approach?
Yang: As more and more Asian companies go global, they realize that localization of the leadership team is the key element to improve local market insights and provide career opportunities to motivate non-home country leaders to commit to the company. Some leading Asian companies, such as Samsung and HTC, are building multinational leadership teams and conducting leadership development programs to improve the diversity and culture of the multinational working environment.
Generally speaking, Chinese companies are in the early stage of developing diversity and creating “borderless” teams. Some leading Chinese companies have many years of using local employees in management positions, but the career development track still has a glass ceiling for those “foreigners.”
What human resources challenges do Asian multinationals face as they expand abroad?
Yang: More than 60 percent of Asian executives in our survey—conducted with the Economist Intelligence Unit—said that cross-border culture differences is the key challenge when companies go global. To take a closer look, the challenges include the lack of employees with strong international work experience, and finding employees who can serve as a suitable and capable bridge between headquarters and overseas markets. In recruiting the right talent from the market, the current obstacle is the existing talent management philosophy and relatively fixed hierarchy within most Chinese companies.
Can you explain how the existing talent management philosophy and hierarchical structure impedes talent recruitment in for Chinese companies in overseas markets?
Yang: The majority of traditional Chinese leaders do not have confidence in managing a foreign workforce. Therefore, they prefer to recruit Chinese employees for overseas assignments. For acquired businesses in overseas market, most Chinese companies only assign a few Chinese leaders to take critical management roles, and there is often not enough integration with the local team in terms of values.
Chinese companies also lack diversified and internationalized human resources policies to enable recruiting and retaining employees in non-home markets. Leadership promotion mechanisms in Chinese companies create a glass ceiling for overseas non-home country staff, which makes these companies less attractive to talent in these markets. Most Chinese companies also lack a systematic rotation plan that would encourage global experience and talent development.
What have successful Asian multinationals done to attract and retain talent as they become global companies?
Yang: As Asian multinationals go global, they see clear benefits in building overseas talent rather than only relying on talent from their home markets. Overseas talent can help those globalizers better understand local markets and cultures and build relationships with local stakeholders.
Some Asian globalizers are also adopting hybrid talent management approaches that combine home-country methods and global practices. For example, Samsung developed hybrid human resources management practices to infuse international talent into its leadership ranks, and established metrics around attracting and retaining talent to promote ownership of and accountability for the new talent strategy.
Our research indicates that the most commonly used methods by Asian multinationals to attract and retain talent include: providing competitive training and development programs, offering competitive compensation and benefits, creating clear and compelling paths for professional growth and advancement, and improving brand reputation.
What would be your advice to a Chinese company looking to expand abroad?
Yang: Chinese companies going global need to cultivate leadership with a global mindset, vision, and management skills, build a diversified culture, and transform the HR operating model, and talent management mechanism. In order to achieve this, Chinese companies need to have a human capital strategy that is aligned with business objectives and develop action plans to execute. Therefore, the companies need to attract international talent, grow them, and also provide bright career development opportunities based on their contributions.
What should Western multinationals know about these top Asian multinationals and their approach to human resources?
Yang: They are competing with Asian multinationals in recruiting talent. Companies need to develop an overall human capital strategy by combining business strategy, insights on the talent market, and the value proposition of potential employees in the market. An implementable action plan with strong alignment with business units will help ensure this outcome.
Moreover, Western multinationals should keep and leverage the advantages of their multinational culture—including an open and diverse environment, encouraging innovation, a flat corporate culture, and respect for individuals.
[author] Christina Nelson ([email protected]) is editor of the China Business Review. [/author]