Author: Frank Mulligan
Brrr! Even though the sun is shining, it’s cold. It’s always cold when the economy slows, and it’s not just psychological.
Hiring freezes are in place in many of the world’s leading companies, and on a world-wide basis. This means that corporate staffers and line managers cannot hire anyone for a fixed period of time, or until an open-ended freeze is cancelled.
Here in China, where we expect the economy to ’slowdown’ to ‘only’ 8% growth next year, there has always been a way of getting around the freeze. But right now it’s getting harder and harder to keep the ice from forming.
Only one year ago the talk was all about the War for Talent in China, but in the not so distant future some HR staffers will be expected to deal with the consequences of slow or negative internal growth, and this is something few of them have ever had to do in the past.
If you find yourself in this situation, what should you do?
China is Different
The starting point, I believe, is to accept the reality of the market. Many people in China still seem to be in denial about the consequences for China of the world slowdown. They hold desperately to the notion that China is somehow ‘uncoupled’ from the rest of the world.
So a first step would be to smell the flowers.
Once you have accepted the situation you need to take action, and the first step is a think-through and a mental modeling of your company’s functions or departments, and the value they offer.
The battle that is ahead of you will be based on the fact that management often think that if they cut staff numbers, any numbers, they can report better financial ratios to the stock market in the next quarterly report. You have to resist staff reductions that are unsupported by data, and you need your own data to do this.
The world’s economy is surely heading into negative territory, and some countries are already in recession, but China will still be rolling along nicely. International companies tend to apply a single brush to all countries, but you have a good rationale for pushing back against this. Hiring freezes are generally issued across the board ,and take no account of the actual situation on the ground.
So map out your understanding of your company’s HR challenges such that you can communicate them to management, and let the management team flesh out the details of where changes and cuts should be made. The final HR plan should incorporate the thinking of as many people as possible, and you should expect a contentious meeting but it’s a process that you are in control of now.
Englightened Self-Interest
Hiring is Job Number 1 in China. Many HR departments are actually cleverly disguised recruitment functions.
As soon as hiring is reduced to any significant degree, HR will be decimated. Many of your best people will move into different areas or industries, and when you need to rebuild your HR team in a year or two it will be virtually impossible. Fight now and save yourself large amounts of unnecessary work later.
A second, selfish reason for creating a HR plan is plausible deniability. Call me cynical but you want to be in a position where you can show that you are part of the solution, not part of the ongoing problem.
For example, your HR plan should be looking at ways and means to both improve quality of hiring, and ways and means to show that you are improving quality of hiring. The same reasoning applies to:
- new hires salary (reduce)
- overtime (reduce)
- hiring costs (reduce)
- retention (improve)
- business culture (strengthen)
- performance (look for more)
- training (rationalize).
Ongoing Skills Demand
Finally, businesses in China will not find that hiring in China has suddenly gotten easier, and all the wrong hires rectify your retention numbers by resigning en masse.
Exactly the people you want to keep will still be in demand, the people-that-you-have-wanted-to-fire-but-were-afraid-to-do-so will be digging in their heels, and increasing their seniority. China’s new labor law means that you cannot be so quick to fire as you might have been in the past.
Soon you are going to need people who can really deliver, and these are not the ones who sit, drink tea, make personal phone calls, and wait to be told what to do. You will be dealing with challenges that many people have never seen before, and experience will be at a premium. A steady hand is going to be needed at the tiller, and judgement will be key.
People with these skills are in short supply. They always are.
Thanks Frank for the interesting insights and another look inside China and inside change.
I do have one question though. In light of the fact that the brain is shaped and fueled literally by the directions we take — is it not also good that Chinese business people continue to see and walk toward a brighter future than the gloom we face daily in the news? Could their optimism not contribute to solutions far faster than our own bleaker predictions? Thoughts?
Comment by Ellen Weber — October 20, 2008 @ 8:07 am
Ellen,
I fully accept your momentum argument and I guess there are four possible outcomes here:
1. The bright future scenario keeps Chinese people spending and investing in stocks/property, which keeps the motor in the economy running, and prevents a recession by substituting internal growth for exports.
2. The bright future is a ’syndrome’ that causes Chinese people to lose money because they don’t recognize the reality of a declining market and keep throwing good money after bad. By the time they realize, it’s too late.
The Chinese Stock Exchange is a good example of this. If you look at the trend over the last year it has been down, down, down. It’s still going down but a lot of people still think that China will have a bright future, and so they keep buying stocks. And losing more money. Each time they think it has hit bottom, it hasn’t.
3. Americans and Europeans are in actual fact much more future oriented than the Chinese, and they may have walked into their current difficulties because of this.
So we imagine that their behaviour was a syndrome. But their natural future orientation will also get them out. Not without a recession of course.
There was already a drift against outsourcing of factories to China (because of rising costs here) before the sub-prime hit, and this drift will probably be accelerated with an Obama presidency. Europe seems also to be bringing factories back home, to Eastern Europe anyway. So big hit but a worse one for China in 1-3 years time.
4. Americans and Europeans are currently receiving a doom and gloom message that will cause them to slow spending, thereby causing a recession but solidifying the economy for the future, and ensuring that such recklessness is not a problem, for at least one generation anyway.
If we add the issue of available information into the equation, then China may not do so well because it is a clearly a ‘false optimism’ that we see here now, one that is fabricated by the dearth of factual information and analysis.
This means that the momentum of any delusion is likely to last longer here, whereas it is easy to see that the US is currently moving towards the light. The Chinese government finds it really hard to take a hit on anything. That would be to admit failure.
Comment by admin — October 20, 2008 @ 11:11 am
Of course smarter, and richer, people than me have other opinions ………..
http://newsfromrussia.com/world/americas/16-10-2008/106575-america_empire-0
Comment by admin — October 20, 2008 @ 11:15 am
What an interesting perspective, Frank, and it looks like a tough year ahead for China - from all you say here. Yikes — we all have a long way to go to create a more humane financial system:-)
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