Four Lessons on Mid-level Talent in China

China’s shrinking workforce, a result of its aging population, is a significant demographic shift that multinational corporations need to consider in every aspect of human capital management. As only children, many young professionals in China are now facing the prospect of caring for their parents and both sets of grandparents on their own. This so called “4-2-1” challenge has imposed enormous financial stress. Compounded by inadequate social welfare provisions and rising costs of living in China, these critical concerns have created new priorities for multinationals’ talent management and retention strategies.

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(Sources: Frontier Strategy Group analysis; United Nations Department of Economic and Social Affairs Population Division Population Estimates and Projections Section)

With China’s changing demographics in mind, multinationals should consider these proven strategies to better nurture and retain high-potential employees for mid-level management in China.

1. Adopt a “Total Rewards” approach

To confront the challenge of rising business costs in China, a growing number of multinationals have adopted a holistic “Total Rewards” approach by integrating an employee’s basic compensation and supplementary benefits with intangible perquisites, such as career development and more personalized requests. This standardized yet flexible reward system provides specific, fixed components within the company’s total HR budget, while allowing for tailor-made benefit offerings to cater to the family support needs of their Chinese employees.

2. Build career development action plans

Many multinationals have successfully developed rewards strategies that help to compensate for China’s insufficient public pension plans and the lack of a secure social safety net. By embedding career development discussions and financial rewards into a comprehensive career development action plan and by partially tying employee bonuses to training completion and performance, employers can help to lessen the burden of family support for Chinese employees and motivate employees toward proactive learning.

3. “Promote or Leave”

Evaluating and selecting capable employees for promotion can be a difficult task. A promotion “expressway” for employees who demonstrate better return on investment can be a very cost-effective approach to screening for talented employees. The “Promote or Leave” high performance leadership (HPL) program is one such initiative designed to cultivate a high-caliber mid-level management team. The performance of high-potential employees is evaluated on a rolling basis, and the bottom 20% is replaced with newcomers.

4. Deploy a multigenerational workforce

As second and third tier markets in China become increasingly important for profitable growth, several multinationals have considered pairing motivated fresh graduates with experienced mentors for a stronger talent mix to allow further expansion into regional markets. High-potential employees without family attachments are often willing to relocate to lower-tier cities while older managers with localized expertise and strong execution skills might struggle to secure senior managerial jobs in fiercely competitive top-tier cities. These more senior employees are also often willing to relocate in order to secure top-level positions in lower-tier cities.


For the full report on “Effective Leadership Management: Make a Case for Mid-Level Management,” FSG clients can visit the client portal. Not a client? Contact us to learn more.

 

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