HR management in China

HR management in China

In line with its strong international position, PerformanSe continues to explore all the trends and innovations throughout the world and offers an immersion into the world of HR in China. The PhD candidate Lea Wang, who carries out her thesis in PerformanSe in collaboration with the University of Paris 8, has interviewed Chinese HR professionals to enable us to better understand what HR management in China is. The objective: to understand the context in which the Chinese HR managers operate, what issues and what differences exist with France and the place for assessment and decision support solutions.


1 The biggest challenges currently faced in China concerning HR management

One of the biggest HR challenge faced in China is the rapid rise of human costs. In recent years, the government guiding criteria for average salary is increased by 10~15% per year, which means that it takes only 5 years to double the current remuneration standard. Along with the high social security cost, increased federal protection for employees’ rights, smart recruitment becomes more than ever crucial in China. Another challenge is the conflict between the standardization need of HR management and the highly flexible nature rooted in Chinese culture. Most Chinese employees haven’t adapted themselves to the working rules of modern market-oriented economy. Generation gap also leads to distinct differences regarding values and norms at work. Young employees (born after 1980s, 1990s) highly value work-life balance, participation in organizational decision making process, and meaning at work. Traditional local Chinese companies emphasizing loyalty could no longer attract, retain the young talents. What’s more, various federal restrictions and regional disparities, thwarts also the flow of talents. HR management in China must learn to become more systematic while adapting to special needs of different population, regions.

2The differences between multinational and domestic companies when facing those challenges

For international companies, they tend to insist on their pre-established HR management system to be applied in China without sufficient knowledge of the local specificities. When problem occurs, the local directors often lack authority to react immediately, while decision making process from the headquarter takes too much time, resulting in poor adjustment to changes. Those superfluous normalizations and procedures should be simplified, while adding more local features and flexibility will help as well. For domestic companies, their lagging notion of HR management, customer-orientation values rather than human, talents orientation, lead them to underestimate the value of human resources, thus being reluctant to do necessary investment in HR development. Meanwhile, all kinds of companies face the same challenges in china: high cost, generation gaps, lack of talents such as management personnel, senior engineers and those with international perspectives in particular.


3Which HR function do Chinese companies invest the most?

It is commonly accepted that Chinese companies spend most money on remuneration. As pointed out by President Cao, “if you cannot afford competitive compensation, you will fail in recruiting talented people.” Besides, government also sets regulations about wage standards and welfare guarantees. Therefore, about 70% of HR budget is put into employees’ compensation. Following that come recruitment and training; those two parts are indeed growing each year. For the state-owned enterprises, 1.5% of the annual budget ought to be used in personnel training and development. As for employee relationship and performance appraisal, they are not of great significance. Chinese companies also seldom focus on the improvement of work environment, nor labor wellbeing.


4What’s the trend in five years?

“after 90s” and “after 00s”, born with technology, internet and globalization, will eventually replace those born in 50s or 60s who experienced wars and cultural revolution. The new generations have forward thinking and spirit of innovation, although lacking sufficient training to become more professional. The relationship between employees and employers will become more like allies rather than superior and subordinate. Besides, the opinions of ordinary employees will be taken into decision-making process and be treated seriously. That’s to say company should give employees enough flexibility to bring their own personal resources into work.


5Which business sectors invest the most in HR management?

All interviewees believe that the emerging industries like IT, high technology companies and financial industry invest the most in HR management. Meanwhile, other industries such as manufacturing underestimate the importance of HR management, partly because of the pressure associated with high cost. The common believe is that HR management will occupy growing importance in the future, despite the business sector.


6Perception of assessment tools applied in HR management for Chinese companies

The acceptance level is low at present. Managers in China rely on their past experience and intuition, rather than scientific tools for decision making and daily operations. However, this situation is changing given that the past experiences of aged managers are commonly considered to be out of date. Personnel assessment is getting more and more important in many aspects of HR management, especially in the recruitment for top managers and fresh graduates. In the middlelevel recruitment such as engineers, the assessment tools are rarely used. In the coming years, this market will grow a lot, especially for local companies, given the high need for cautious recruitment. If the market gets well sensitized, it may reach international level. Experts and professors from this field should undertake the mission for proving reliability and theoretical support for scientific tools. Successful testimonies of personnel assessment application can speak even louder. Test publishers and consultants should pay more attention to the practical aspect of assessment application.


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