Talent Management Problem in China

In this paper, China’s current problem with talent management –mainly due to lack of qualified university graduates for multinational companies that engage in offshore service operations, the lack of English skills, poor financing of universities, and quality-lacking curriculums– and the ways that China can tackle with this problem by engaging in talent management operations will be discussed. The solution that the paper embraces is that China should adapt itself to the Organization Man model of 1950s as a talent management strategy since the current situation in China cannot work well with the Talent on Demand approach mainly due to lack of talent despite high number of employees.

The paper will firstly define talent management in general and cover the historical trends in talent management, secondly give overall information about China’s talent problem with the reasons, and lastly mention the possible ways to solve the Chinese talent problem by embracing the Organization Man model of talent management. The main reference points will be Peter Cappelli’s article named “The Talent Management Problem: Why We Need to Think Differently about Talent Management” and Diana Farrell and Andrew J. Grant’s article of “China’s Looming Talent Shortage.” Additional sources will also be used through the paper. A. TALENT MANAGEMENT AND HISTORICAL TRENDS

1. Defining Talent Management
All companies or organizations require human capital internal to their structures. Human capital has long served as one of the most important internal operation tool for these companies and organizations. Even though the production costs has been decreasing over years due to engagement in high technology production techniques that do not require human power, human factor will still keep its importance in the future due to management’s inescapable need for human capital to operate. Accordingly, talent management is a tool to anticipate the need for human capital and then to set out a plan to meet this (Cappelli, 2008). The basic aim of talent management is “getting the right people with the right skills into the right jobs” (Cappelli, 2008). This also represents one of the most important internal problems of companies and organizations.

This job is a tough one to be managed; however, it is very crucial for success and creating competencies for the company or organization itself. In the recent years, an increasing number of business companies have started to engage in talent management strategies. This new trend in HR reflects the ever increasing concerns of the companies on risk management, cost management and change management. Accordingly, they see the gaps in talent and the current potential for effective managing and building key talent (McCool, 2010). In my opinion, companies started to adapt to this trend simply because talent management is an effective tool for calculating the risk that is likely to appear in the future, to make cost-benefit analysis to have an idea about the opportunity costs of training or hiring choices of the companies, and to adapt to change that occurs during the years by being able to shift your talent resources as the way you desire when necessary.

Before going into the details of talent management trends that occurred during 1900s and 2000s, it is important to mention the basic failures that companies or organizations can do while engaging in talent management. Simply, we can call these failures as mismatches between supply and demand and list them as (1) having too many employees and (2) having too little talent (Cappelli, 2008). Both have their shortcomings: the first one may result in layoffs and restructurings, the second one may create talent shortages (Cappelli, 2008). Eventually, we can say that the ultimate goal of talent management can be summarized very well in these words of Peter Cappelli: “… goal of talent management is the more general and important task of helping the organization achieve its overall objectives. In the business world, that objective is to make money. And making money requires that you understand the costs as well as the benefits associated with your talent management choice.” (Cappelli, 2008)

2. Talent Management Practices
Talent management practices that occurred throughout the history can be analyzed by listing 3 effective trends: (1) do-nothing model, (2) forecasting and succession planning model of 1950s and (3) Talent on Demand model. a. Do-nothing model:

Do-nothing model is a reactive approach that makes no attempt to predict about the possible future requirements for your organization and that does not develop any plans to address them. In that sense, this method requires “outside hiring”: searching for your supply of talent that is necessary to fulfill your business requirements in the outside labor market (Cappelli, 2008). It is important to mention that this trend has lost its effectiveness with the proof of outside hiring as a very costly tool for developing human capital. b. Bureaucratic planning model (Organization Man model):

This model, also called the Organization Man model, was the popular trend in 1950s. Mostly, old companies which are also called “academy companies” embraced this model within their human capital operations. They used very complex systems to engage in forecasting and succession planning, which made them the “breeding grounds for talent” (Cappelli, 2008). They developed their employees internally in line with the needs and vacancies inside the organization. However, it is very crucial to mention that this model was effective when highly predictable business was surrounding the environment. Nowadays, this is not the situation that the business world faces. Everything in business operations, from production to costs to sells, is unpredictable, which does not make forecasting an efficient tool for long term talent management strategies anymore. c. Talent on demand model:

As the failures of do-nothing and 1950s models of being inaccurate and costly have been proven, the necessity for a new perspective in talent management occurred. It was obvious that to develop employees internally or to do outside hiring is quite costly, and does not respond to the organizational needs properly. As a response, Talent on Demand approach started to dominate the current environment. Basically, this model: “… represents a balancing of interest –between internal development and outside hiring, between interests of employees and those of the organization.” (Cappelli, 2008) What is more crucial about this Talent on Demand model is that, different from the old models, it tries to approach to the uncertainty which is present in the business environment from a different perspective. It seeks the ways to respond to uncertainties by adapting to them.

Naturally, the method of planning workforce would not work with this model. Moreover, it accepts that uncertainty cannot be wiped out by long-term plans and forecasts. Another very important thing about Talent on Demand method is the emphasis that it makes to retaining talent after recruitment. This is mainly because of the shortcomings of outside hiring, and the related problems that occurred as the business concerns: mainly, being able to attract the right employee to your company and to retain them (Cappelli, 2008). To summarize the Talent on Demand method, the words of Cappelli (2008) of this 3rd method can be beneficial: “The ability to get the right people with the right skills into the right jobs in a cost-effective way which makes it possible for an organization to adjust and respond in the strategy arena.”

B. CHINA’S TALENT MANAGEMENT PROBLEM
As we gave information about talent management on a general basis, we should now learn about the problem in China related to talent management. Later on, we will be able to relate the first and the second parts to each other, namely, finding the best solution of talent management for China’s growing talent shortage. China, as the global manufacturing leader with low labor cost and enormous domestic market, is now trying to increase its service-based operations, which is one of the most important indicators of economic growth and development. China’s main goals are to engage in offshore IT and business process services successfully (Farrell & Grant, 2005). However, it is not very easy for China since it experiences a crucial problem: talent shortage. There are many reasons for that, related to higher education system, domestic market and multinational companies in the Chinese market.

The basic problems in China are as follows. Firstly, there are a high number of university graduates (9.6 million in 2003) but they are not qualified. They lack the practical experience and the skills necessary for service occupations. Therefore, the top positions remain as vacancies both in domestic and multinational companies in the Chinese market. This problem of unqualified university graduates can be solved by increasing the quality of curriculums and engaging in more effective and fair funding among universities. This can be done by collaboration of the the state with the private companies in order to better respond to the needs of talent. Secondly, English speaking graduates are very few in number. Even they speak English, the quality is poor and it is not enough to work efficiently in the multinational environment. This problem can be overcome by recruiting English teachers and training them in accordance with the university curriculums and general profile of Chinese students.

Thirdly, there is a lack of mobility in China, which can be proven by the fact that only one-third of Chinese university graduate students move to the other cities to work (Farrell & Grant, 2005). Therefore, the companies in China have problems with recruiting the graduates. Fourthly, there is an obvious competition for talent in China, between domestic and multinational companies. This is mainly because of the vast domestic market which provides good opportunities for the university graduates. Therefore, the interest of students in multinational companies has fallen dramatically (Schmidt, 2011). Moreover, a growing proportion of high-potential Chinese workers see domestic employers as a better bet (Schmidt, 2011). In that sense, multinational companies cannot find necessary talents for their organizations. Accordingly, they are reluctant to do offshoring in China, but they rather prefer to go to other low-wage locations such as Philippines Lastly, China lacks effective managers.

It has to create 75,000 leaders in 10 years to occupy the vacancy positions (Farrell & Grant, 2005). However, China does not have the necessary background to train those managers. These five main problems affect the business environment –both domestic and multinational- and the policy-making realm of China. They are the main obstacles behind shifting from manufacturing to service-based economy in the near future. In other words, they are the main obstacles behind development. Therefore, these problems should be solved as soon as possible so that China improve its economic situation in the world, and get closer to being a global giant.

C. SOLUTION TO CHINA’S TALENT SHORTAGE: EMBRACING ORGANIZATION MAN MODEL After discussing the talent shortage in China and the main reasons for this, in this section, a possible solution to this problem will be argued. Before starting, it is very crucial to understand that China requires talent management operations immediately since it exhibits both of the two failures of talent management: mismatch between supply and demand, namely, having too many employees but having too little talent. Therefore, it is obvious that there is an urgent need for talent management in China. However, there are many approaches to talent management, as discussed in the first section of this paper. At this point, we should analyze the other conditions in China to decide on which approach to use for this very specific case. This paper finds the solution in engaging in Organization Man model of 1950s, rather than the Talent on Demand model of 2000s, although the failures and shortcomings of the first one has been proven throughout the time, and the need to update the approach to talent management has occurred.

Talent on Demand approach was this new updated version to work more efficiently and effectively. Nevertheless, the choice is Organization Model and there are several reasons for this. Firstly, it is obvious that Talent on Demand method works on the existing talents and the ways to recruit and retain them effectively, in accordance with the right position and cost-savings ideas. However, the situation in China clearly reflects that the real problem is the lack of talent. It means that the first step that China should take must be creating talents, before looking for the ways to recruit and retain them properly. In that sense, Organization Man model is more suitable with China’s talent management, since it deals with training talents by inner operations of the companies like employee trainings, long-term forecasting and succession planning. This model tries to overcome the concern of having shortage in internal talent simply because there was no any other way to have talents rather than producing them by the companies themselves (Cappelli, 2008). In that sense, China should:

“… build a sustainable talent development system within China, for China. [China should] do it right now.” (Thompson & Thompson, 2011) At this point, it is important to mention that training talents within the organizations as an internal process is quite time-consuming and costly. Nevertheless, it appears as a must for China in the sense that the level of underdevelopment requires taking this step before anything else. China should put the time and cost issue aside and increase its efforts to training talent, since this is the first phase of moving to service based operations on a national basis. We see in economically developed countries, where service sector has the highest share in GDP, that service-related posts are occupied by highly qualified employees with good practical skills and university background. If China aims to attain this end, this should be the path to be taken. Secondly, since China has to train talents, the Organization Man model provides China with a much better framework of training by its succession planning tool.

Basically, succession planning is about predicting which employee will occupy which post, many years in advance (Cappelli, 2008). If China makes forecasts about the future needs for these posts, it will possibly show a bigger picture of the future in the sense that the potentials and expectations can be compared and contrasted in order to improve the current actions and precautions. For example, the number of talents required can be forecasted, and long-term plans can be created accordingly, by trying to create that number of talents in a given period of time. It will prevent China from experiencing shortages of talent, at least in the long run. In my opinion, once again, it shows the long-term approach of the Organization Man model to talent management, meaning that the results can be attained after many years. Both training and succession planning can show their effectiveness in the long-run because of the very nature of “training” and “planning.” Thirdly, by engaging in Organization Man model, companies can decide which candidates are suitable to work for which experience by themselves, rather than leaving a place for the employees to decide about that (Cappelli, 2008).

This may also help China with making long-term predictions about talent requirements. As the main reasons to choose Organization Man model for solving China’s talent shortage problem are mentioned, a further advice for China can be to engage in Talent on Demand approach only after totally fulfilling the requirements of Organization Man model and enjoying the satisfying environment that it will create. If this step is accomplished successfully, China can look for retention methods, adapting to changing environments, creating talent pools and portfolios, structuring internal job boards within the business organizations, applying to the methods of outsourcing, contract-based and temporary employment, making shorter forecasts and so on, which are all the tools of Talent on Demand approach to reduce risk and uncertainty and to provide retention of talent to the companies.

REFERENCES

Cappelli, P. (2008). Talent management for the twenty-first century. Harvard Business Review, Retrieved from http://hbr.org/2008/03/talent-management-for-the-twenty-first-century/ar/1

Cappelli, P. (2008). The talent management problem. In Talent on Demand: Managing Talent in an Age of Uncertainty. Boston, Massachusetts: Harvard Business Press.

Farrell, D., & Grant, A. J. (2005). China’s loomig talent shortage. The McKinsey Quarterly, 4, 70-79. McCool, J. D. (2010, March 05). Talent management function gains momentum. Bloomberg Businessweek, Retrieved from http://www.businessweek.com/managing/content/mar2010/ca2010035_970348.htm Schmidt, C. (2011, March). The battle for china’s talent.Harvard Business Review, Retrieved from http://hbr.org/2011/03/the-battle-for-chinas-talent/ar/1 Thompson, A. P. & Thompson, J. (2011, September 26). Building local talent in china. HBR Blog Network, Retrieved from http://blogs.hbr.org/cs/2011/09/building_local_talent_in_china.html

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