Workforce.com

Vendors Fast Boat to China

March 9, 2007
China’s booming economy is sometimes called the new "gold mountain," and human resource consulting firms are rushing into the country to stake a claim.

Just as California in the mid-1800s was known as gold mountain to the Chinese, vendors of HR services with roots in the West see vast potential riches in today’s China, with its tough leadership talent problems. Prominent companies including Hewitt Associates, Mercer Human Resource Consulting, Korn/Ferry International and Personnel Decisions International have set up operations in the country, along with smaller consulting outfits.

These HR specialists are typically growing quickly in China. But organizations seeking assistance with their Chinese operations would do well to take a close look at the value provided by vendors, says Teresa Woodland, a Beijing-based consultant. Woodland, who worked for about a decade at consulting giant McKinsey & Co. in China before recently starting her own firm, says Chinese language fluency is a key to understanding the situation in China.

"I’ve seen many consultants who don’t speak Chinese who are effective," says Woodland, who speaks Mandarin. "But I tend to think that to be truly effective here you need to speak Chinese, because there’s so much you won’t catch if you don’t."

The rise of consulting services in China comes amid major difficulties companies have reported having in finding, retaining and developing leaders. Last year, the American Chamber of Commerce in Shanghai surveyed 274 U.S.-based companies with operations in China and found the No. 1 business challenge in China was "human resource constraints, including attracting and retaining managers and workers." In a recent Korn/Ferry survey about leadership in Asia, nearly half the worldwide executives polled doubted local talent in China will reach global standards within five to 10 years.

Meanwhile, many HR departments in China don’t have the depth or breadth of experience offered by their counterparts in the West. Not surprisingly, they are eager to get help on leadership matters. But so are companies that have sophisticated HR operations in China, such as Motorola.

It all amounts to heady growth for firms like Mercer Human Resource Consulting, a unit of professional services firm Marsh & McLennan Cos. Since 2001, Mercer’s mainland China practice has expanded from 20 people to 200. Revenue from the mainland is climbing about 50 percent annually, as both domestic and international companies seek Mercer’s help with grooming leaders and managing talent, says Guo Xin, managing director at Mercer for mainland China, Hong Kong and Taiwan.

A big challenge for Guo is hiring enough capable people to staff his own organization—a dilemma similar to the ones facing his clients. "The demand is there," says Guo, a Chinese native. "Our limitation is our capacity to grow."

Mercer rival Hewitt also is seeing operations expand rapidly in China. Hewitt’s headcount in the country has been growing 20 percent annually for each of the past couple years, to more than 200 people, says Eric Fiedler, Hewitt’s regional director for the Asia-Pacific area.

Fiedler, who is based in Shanghai and serves as chairman of the American Chamber of Commerce in Shanghai business group, rates his Chinese-language skills as "not very good." But he argues that Chinese fluency is not a requirement in the professional services field. "My staff and the people that we work with in many of our clients all speak great English," he says. "The need for Chinese fluency really varies depending on where you are working and who you are working with."

Leadership consulting firms need to be able to operate within the language of the country, says Paul VanKatwyk, managing director of China operations for Personnel Decisions International, a Minneapolis-based firm that specializes in assessing and developing leaders. VanKatwyk does not speak Chinese, but six of the seven consultants in PDI’s Shanghai office are native Chinese speakers.

VanKatwyk, a trained industrial psychologist born in the U.S., has almost seven years of experience living and working in Asia. But he doesn’t claim to be an expert on doing business in China. In fact, he says his status as an outsider—albeit one familiar with the challenges leaders on a global stage can face—can help him coach Chinese executives. One of VanKatwyk’s goals is to foster independent thinking on the part of his clients, so it’s important for him not to provide solutions to their business problems.

"Here, I really honestly don’t know the answers," he says. "So I’m not tempted to do that."