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More Evidence of China’s Too-Fast Track

February 29, 2008
Related Topics: Global Business Issues
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A new study from consulting firm Hay Group echoes some of what we learned last year in a major report on China: Premature promotions and related salary hikes can hurt companies. In its study of the Chinese operations of more than 300 multinational corporations, Hay Group found that when Chinese employees are lured away from their current job, they not only get a promotion but pocket at least 40 percent more in base salary. This compares with averages of 24 percent and 21 percent in Singapore and Hong Kong, respectively. The report also found that if employees move to a position that is two steps above their current role--a “Champagne” promotion--their base salary jumps by 91 percent. That compares with a 48 percent increase in Singapore. On average, Hay Group says, Chinese senior managers are five years younger than their Asian counterparts, and the gap widens even more in comparison to the West. In our report on China’s “Too Fast Track” in March 2007, we found that a rapidly growing economy combined with a dearth of leadership talent added up to many overly quick promotions. Edward Tai, an executive with Hyatt International Hotels and Resorts, offered us a case in point. He told us that Hyatt often creates elaborate four-year plans to groom up-and-coming execs to head a department in China. But feverish competition for managerial talent means the plans can go awry. “By the second year, we do not think he is quite ready,” Tai said. “But the other hotel chains, or other places, thinking he is from a Hyatt or a Grand Hyatt, say, ‘He’s ready,’ and give him double the pay and then bring him over.” Hay Group recommends that companies develop long-term pay-for-performance programs. Multinational firms “must stop the current ‘Pay now, worry later’ compensation programs,” Hay Group’s Sean Joo said in a statement. We found in our research that some major multinationals were attempting to solve the immature-manager puzzle through a focus on employee development and careful attention to corporate culture. Have you heard of companies in China handling this issue wisely--or unwisely? I’d like to hear your thoughts. E-mail me at efrauenheim@workforce.com or leave a comment below.

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